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2015ANNUAL REPORT
1
2015ANNUAL REPORT
RESULTS OVERVIEW 2
About the report 3Company’s profile 3CAEPCO results within the frames of ceiling tariffs program for 2009–2015 4Key performance highlights for 2013–2015 5Geography of operations 6Key events of the year 7Priorities and outcomes 8
MANAGEMENT LETTER
Letter of the Chairman of the Board of directors 11Letter of the President 13
CORPORATION OVERVIEW 14
History 15Business model 16Main production highlights 16Corporation structure 17Subsidiaries 18Development strategy 20Ratings 21
MARKET ENVIRONMENT ANALYSIS 22
Economic overview 23Energy sector overview 25
PERFORMANCE AND DEVELOPMENT PROSPECTS OVERVIEW 32
Implementation of the investment projects within the period of ceiling tariffs program 2009–2015 33Results in 2015 35Financial and economic highlights 37Main goals and objectives for 2016 41Prospects of the 2020 Investment Program 41
CORPORATE GOVERNANCE 42
Shareholders structure 43Results of the general meeting of shareholders 43Organizational structure 44Dividends 46Board of directors 46Members of the Board of directors 47Committees of the Board of directors and their functions 50The Board of Directors performance overview 51Executive body 52Internal control and audit 52Report on compliance with Corporate governance code 53Key principles of the corporate governance code 54
RISK MANAGEMENT 56
Analysis of significant risks affecting performance 57
SUSTAINABLE DEVELOPMENT 60
Material aspects and boundaries 61Stakeholder engagement 63Environmental policy 64Information policy 70Human resources and social policy 71Interaction with trade union organizations 75Occupational health and safety 76Corporate events 79Charity and sponsorship 80
GRI G4 COMPLIANCE TABLE FOR THE MANAGEMENT REPORT 81
FINANCIAL STATEMENTS 86
GLOSSARY 94
ABBREVIATIONS 95
CONTACTS 96
TABLE OF CONTENTS
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2015ANNUAL REPORT
2
STARTED IN 2009,the government’s Ceiling tariffs Program completed in 2015 The program allowed to include investment costs in electricity generation tariffs, which was extremely helpful for attracting investments in modernization projects aimed at upgrading old or adding new equipment at Kazakhstan’s energy companies From 2009 to 2015, investments in Kazakhstan amounted to 988 KZT bln, of which 78 KZT bln, or 7 9%, were invested by CAEPCO JSC
RESULTS OVERVIEW
Key aspect of CAEPCO JSC strategic development is increasing efficiency of production by virtue of renovation of fixed assets Since 2009 the Corporation carries out large scaled investment program for modernization and reconstruction of the produc-tion facilities In 2015, 27 KZT bln were spent for implementing the investment program This includes 19 KZT bln spent by CAEPCO JSC on generation projects in 2015
ABOUT THE REPORT
COMPANY’S PROFILE
Central-Asian Electric Power Corporation (CAEPCO JSC) has been releasing annual reports since 2013 The previous annual report for 2014 was published in August 2015
The Corporate Report contains information on the activities of CAEPCO JSC and its subsidiaries The docu-ment includes Sustainable Development Report prepared
for the first time in accordance with GRI G4 guidelines During preparation the main information disclosure principles and GRI guidelines were used Section “The report’s GRI G4 compliance table” contains a table ex-plaining where to find standard reporting elements and performance data
Central-Asian Electric Power Corporation JSC is the largest vertically integrated private holding company in the field of electricity and heat generation in Kazakhstan In the regions where it operates, CAEPCO JSC Group of Companies holds a monopoly in generation and distribu-tion of heat and distribution of electricity (accounting for 76% of the market), dominating the Kazakhstani market for electric power generation (7 2%) The Corporation operates in accordance with international manufactur-ing, environmental, occupational health and social re-sponsibility standards
MISSION
Improving the living standards for customers and pro-moting economic development of the regions where we operate by providing first-class energy supply services for households, industrial facilities and public amenities
The Corporation is working to accomplish this mission by operating in accordance with international manufactur-ing, environmental, occupational health and social respon-sibility standards
Employees are key to the Corporation’s effectiveness, and their value lies in their high professionalism, ability to work in a team and focus on results
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2015ANNUAL REPORT
RESULTS OVERVIEW
107 7894 14
107 93
(7 61)
10 9810 39
22 323 123 08
2014 20152013
28 2 26 824 5
6,081 6,5296,137
6,6056,2736,132
37 4641 02
32 43
216 57238 11
150 68
SEVKAZENERGOPAVLODARENERGO
ELECTRICITY GENERATED (mln kWh)
2009
4000
5000
6000
7000
3000
2000
1000
0
2010 2011 2012 20142013 2015
5,399 5,599 5,665
2,377 2,410 2,513 2,410 2,603 2,733 2,809
3,022 3,189 3,152 3,162 3,534 3,348 3,720
5,572
6,137 6,0816,529
STRUCTURE OF GENERATING FACILITIES (MW)
2009
800
1000
1200
600
400
200
0
2010 2011 2012 20142013 2015
575
49 6% 50 4% UpgradedNot modernized
942 942 909 9741,061 1,076 1,141
566
930 930 897 897 897 787
20092015
CEIL
ING
T
AR I F F S
INVESTMENTS (KZT bln)
2009
58
2010
10
2011
11
2012
13 14
2013 2014
17
2015
20
15
10
5
0
NEW AND UPGRADED FACILITIES (MW)
2009
12
2010 2011
65
2012
125
2014
87
2013
277
2015
200
250
300
150
100
50
0
HEAT GENERATED (thous Gcal)
2009
4000
5000
6000
7000
3000
2000
1000
0
2010 2011 2012 20142013 2015
6,0036,372
6,120
1,9101,927 1,868 1,918 1,791
1,9461,861
4,093, 4,445 4,252 4,536 4,341 4,659 4,412
6,454 6,132 6,605 6,273
SEVKAZENERGOPAVLODARENERGO
2009
2000
2500
3000
3500
1500
1000
500
0
2010 2011 2012 20142013 2015
678 669
619
1,425 1,412 1,330 1,362 1,469 1,392 1,329
1,093 1,097 771 547334 308 310
598467 474 464
SОx, mg/m3 NOx, mg/m3
CONCENTRATION OF POLLUTANTS
Ash, mg/m3
24 03 24 8821 73
78 KZT bln were invested
Emissions of ash reduced by 72%
Growth of heat energy 5%
566 MW were commissioned and renovated
Growth of the installed capacity by 23%
Growth of electric energy 21%
Net profit (KZT bln)
Sales (KZT bln)
EBITDA margin (%)
Investments (KZT bln)
POWER GENERATED
Electricity (mln kWh)
Heat (thous Gcal)
ASSETS
Non-current assets, KZT bln
Current assets, KZT bln
EBITDA (KZT bln)
28916477121212
CAEPCO RESULTS WITHIN THE FRAMES OF CEILING TARIFFS PROGRAM FOR 2009–2015
KEY PERFORMANCE HIGHLIGHTS FOR 2013–2015
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2015ANNUAL REPORT
RESULTS OVERVIEW
AKMOLA REGION
117,310
Akmola EDC
AEDC-Energosbyt LLP
ASTANA
Kostanai
KaragandaOskemen
Pavlodar
Petropavlovsk
LEGEND
ELECTRICITYHEAT
Number of energy consumers
Generation of electricity and heat
Distribution of electricity
Distribution of heat
Sales of electricity and heat
ASTANA
227,667205,721
Astanaenergosbyt LLP
PAVLODAR REGION
220,366164,809
Pavlodar CHP-2
Pavlodar CHP-3
Ekibastuz CHP
Pavlodar REDC JSC
Pavlodar heat networks LLP
Pavlodarenergosbyt LLP
161,196 70,561
Petropavlovsk CHP-2
North-Kazakhstan REDC JSC
Petropavlovsk heat networks LLP
Sevkazenergosbyt LLP
NORTH-KAZAKHSTAN REGION
GEOGRAPHY OF OPERATIONS KEY EVENTS OF THE YEAR
In April 2015, CAEPCO JSC became one of the 15 national champions of medium-sized businesses in Ka-zakhstan The Competitiveness Council of Atameken Na-tional Chamber named CAEPCO JSC as a leader in the en-ergy sector which fully meets the standards of leadership, strong market reputation and internal infrastructure
In June 2015, a new turbo generator No 2 was put into operations at PAVLODARENERGO’s Pavlodar CHP-3, increasing the plant’s available capacity by 45 MW Total installed capacity of the plant’s upgraded facilities reached 255 MW with the total capacity of Pavlodar CHP-3 being 525 MW
In July 2015, a new cooling tower No 5 was put in-to operations at PAVLODARENERGO JSC The first phase of the project was building the foundation and the bowl base Water cooling technology used in the cooling tower No 5 meets modern environmental standards Useful life of the equipment is at least 25 years
In September 2015 new turbo generator No 1 was put into operations at SEVKAZENERGO’s Petropavlov-sk CHP-2, increasing the plant’s capacity to more than 500 mln kWh per year Thanks to the new turbine, CHP-2’s available capacity increased by 63 MW The total capacity of the plant’s power equipment reached 455 MW Total installed capacity of the station amounted to 479 MW thanks to commissioning of reconstructured turbine unit No 7 in October
In October 2015, the Central Power Dispatch Facility (CPDF) was put into operations to manage the electrical grid of Pavlodar region CPDF monitors the work of all power plants in the region, showing power flows across the power network and the work of all substations in re-al time, as well as helping to prevent emergencies at an early stage
In October 2015, CAEPCO’s new Data Processing Center was launched in Pavlodar The Center ensures un-interrupted operation of all modern information systems at the facilities of the Holding in Pavlodar, North-Kazakh-stan and Akmola regions, and the cities of Astana and Almaty
In November 2015, after a thorough overhaul, turbo generator No 4 was put into operations at PAV-LODARENERGO’s CHP-3, increasing the installed capac-ity of the completely renovated equipment to 540 MW
In 2015, Baiterek National Managing Holding, rep-resented by its subsidiary funds, became one of the shareholders of CAEPCO JSC After the acquisition, the shareholder structure of CAEPCO JSC is as follows: Central-Asian power-energy company JSC – 57 37%, European Bank for Reconstruction and Development – 24 16%, Kaz Holdings Cooperatief U A – 11 22%, KIF ENERGY S A R L – 4 35%, Baiterek Venture Fund JSC – 1 45%, CKIF ENERGY S A R L – 1 45%
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2015ANNUAL REPORT
RESULTS OVERVIEW
PRIORITIES AND OUTCOMES
induction-type electricity meters were replaced with electronic ones
Thanks to the introduction of AECMS for households and reconstruction of 0 4 kV high-voltage power lines using SIP wire, in 2015 CAEPCO JSC completely elimi-nated excessive losses and reduced technical losses from 9 08% to 8 78% at PAVLODARENERGO JSC and from 10 2% to 9 7% at SEVKAZENERGO JSC
In 2015, reconstruction of Akmola EDC’s 110/10 kV Astana substation was completed Thanks to the recon-struction, total capacity of power transformers increased from 80 MVA to 126 MVA, improving reliability of power supply for customers in Astana Further increase in trans-mission capacity will be achieved by building a 110 kV power line between CHP-2 and Astana
To enhance the reliability of the Pavlodar energy sys-tem as part of Kazakhstan’s electrical grid, construction of Promyshlennaya 220/110 kV substation with 220 kV outdoor switchgear is under way The works are sched-uled for completion in 2016 As for the reconstruction of cells and protection and control equipment at Promysh-lennaya 220/11 kV substation with 110 kV power line, oil circuit breakers were replaced with SF6 ones, plus, disconnect switches were replaced
INVESTMENT PROGRAM
In 2015, 26 85 KZT bln were spent for implementing the investment program This includes 19 KZT bln spent by CAEPCO JSC on generation projects in 2015
Started in 2009, the government’s Ceiling tariffs Pro-gram ended in 2015 The program allowed to include investment costs in electricity generation tariffs, which was extremely helpful for attracting investments in mod-ernization projects aimed at upgrading old or adding new equipment at Kazakhstan’s energy companies From 2009 to 2015, investments in Kazakhstan amounted to 988 KZT bln, of which 78 KZT bln, or 7 9%, were invest-ed by CAEPCO JSC
During this period, Kazakhstan’s generating capacity increased by 3,971 MW, of which CAEPCO JSC accounts for 566 MW, or 14 3%
UPGRADING OLD AND ADDING NEW EQUIPMENT
According to the plan, new turbo generator No 2 was put into operations at PAVLODARENERGO’s Pavlodar CHP-3 in June 2015 As a result, the plant’s installed ca-pacity reached 525 MW and 1,098 Gcal/h with invest-ments totaling 7 4 KZT bln
Further, after an overhaul in November 2015, turbo generator No 4 with rated output of 125 MW was put into operations at Pavlodar CHP-3, which increased the
plant’s installed capacity to 540 MW and 1,126 Gcal/h The overhaul budget totaled 7 0 KZT bln
In 2015, Pavlodar CHP-3 purchased equipment and materials for the overhaul of turbo generator No 6 with its entry into service scheduled for 2017
In July 2015, new cooling tower No 5 was put in-to operations at Pavlodar CHP-3, increasing the plant’s available power generating capacity, especially in sum-mer, due to improved vacuum in turbine condensers The project costs totaled 1 2 KZT bln
In September of the reporting year, new turbo gen-erator No 1 was launched at SEVKAZENERGO’s Pet-ropavlovsk CHP-2, increasing the plant’s capacity from 434 MW to 455 MW The reconstruction costs totaled 5 3 KZT bln
In October after the reconstruction turbine unit No 7 was put into operations and as the result the capacity of the station reached 479 MW In 2015 cost of works amounted to 641 47 KZT mln
Modernization of turbo generator No 5 at Petropav-lovsk CHP-2 continued in 2015 with a view to increasing its capacity from 33 MW to 95 MW In addition, mod-ernization of the plant’s boiler unit No 12 is under way to increase steam output by 50 tons per hour and reduce harmful emissions into the atmosphere, thereby improv-ing the plant’s reliability and efficiency Turbo generator No 5 and boiler unit No 12 are scheduled to enter ser-vice in 2016
CONSTRUCTION OF ASH DUMPS
In 2015, PAVLODARENERGO JSC finished construc-tion of the second phase of ash dumps at PAVLODAREN-ERGO’s CHP-3 and CHP-2 and started construction of the second phase of the ash dump at Ekibastuz CHP in the bed of Lake Tuz
RECONSTRUCTION OF POWER FACILITIES
In 2015, 7 1 KZT bln were invested by CAEPCO JSC in its power distribution companies These include recon-struction of 164 59 km of 110–35 kV overhead power lines along with 155 29 km of 10–0 4 kV overhead lines and underground cables
In the reporting year, the company continued to replace bare wire with self-supporting insulated wire (SIP) and introduce the automated energy consump-tion monitoring system (AECMS) for households As a result, 80 4 km of bare wires were replaced and 12,591
RECONSTRUCTION OF HEAT NETWORKS
In 2015, 0 7 KZT bln were invested by CAEPCO JSC in the renovation of heat networks Heat networks with total length of 970 m and 2,217 m were renovated in Pavlodar and Ekibastuz respectively using pre-insulated pipelines Heat networks with length totaling 5,078 m were renovated in Petropavlovsk using PU foam insula-tion
During the reporting year, automatic heat consump-tion controllers, industrial controllers and modems con-necting mechanisms and instruments with the dispatch service were installed at heat transmission facilities
In 2015, companies within CAEPCO JSC purchased heat imaging equipment for monitoring and diagnostics of main pipelines, as well as ultrasonic flaw detectors Implemented as planned, these measures helped to re-duce network heat losses by 2 6%
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2015ANNUAL REPORT
RESULTS OVERVIEW
Dear shareholders and partners,
Our performance in 2015 proves that Central-Asian Electric Power Corporation is firmly established on the Kazakhstani market During the reporting period, the Corporation has demonstrated its commitment to the principles of sustainable development, operating in ac-cordance with international manufacturing, environ-mental, occupational health and social responsibility standards In 2015, CAEPCO JSC was recognized as a champion of medium-sized businesses in the energy sec-tor thanks to its strong market reputation, internal infra-structure and performance These achievements will cer-tainly make the Corporation more attractive to investors During the reporting year, Baiterek National Managing Holding became one of the shareholders of CAEPCO JSC in addition to the European Bank for Reconstruction and Development and the Islamic Infrastructure Fund The new investors intend to support all the current projects and promote further development of the Corporation in every endeavor
The program based on the Kazakhstani government’s resolution “On ceiling tariffs” ended in 2015: it allowed the companies to include investment costs in electrici-ty tariffs with a view to upgrading generation facilities CAEPCO JSC spent 78 KZT bln, or 7 9% of the country’s total, on modernization and reconstruction of its facili-ties
The reporting year shows the results of the 2010–2015 Corporate Strategy Since the strategy was adopt-ed, the Corporation’s assets have more than trippled and the installed capacity increased by 23% As part of the Strategy, a number of goals have been achieved in areas
such as reliability and corporate governance improve-ment, introduction of energy-saving and energy-effi-cient technologies in energy generation and transmis-sion CAEPCO JSC became an industry leader, the second biggest company in the energy sector in terms of revenue and the third biggest company in terms of capacity
The Corporation will continue to develop in areas where it is currently operating The Corporation’s Devel-opment Strategy for 2016–2020 has been prepared in accordance with the goals set in the government’s “Nurly Zhol” program aimed at improving the infrastructure of the National Electrical Grid We have also considered the challenges posed by today’s energy market and global trends and will focus on promoting alternative energy, energy efficiency and conservation
The Corporation will continue to implement its equip-ment modernization program aimed at improving gener-ation, reduction of electricity and heat losses
By achieving the goals set out in the Development Strategy, the Corporation will be able to reinforce its leading position on the Kazakhstani energy market
LETTER OF THE CHAIRMAN OF THE BOARD OF DIRECTORS
MANAGEMENT LETTER
ALEXANDR KLEBANOV CHAIRMAN OF THE BOARD OF DIRECTORS OF CAEPCO JSC
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2015ANNUAL REPORT
RESULTS OVERVIEW
Dear partners and colleagues,
Since its establishment in 2009, vertically integrated holding Central-Asian Electric Power Corporation JSC has been one of the leaders of the Kazakhstani energy mar-ket
The government has been very instrumental in pro-moting growth of the country’s energy companies Among other factors, the program based on the govern-ment’s Resolution “On ceiling tariffs” has been driving changes in the sector Effective during the period be-tween 2009 and 2015, the program helped to modern-ize, restore and launch generation facilities with a total capacity of 3,971 MW throughout the country, of which CAEPCO JSC accounts for 14 3% The program helped to markedly reduce the number of outages at power plants of national and local significance The ceiling tariffs Pro-gram launched in Kazakhstan in 2009 has a proven track record of efficiency
In 2015, the Corporation continued reconstruction and modernization of its generating facilities with invest-ments totaling 26 85 KZT bln
The major projects completed this year include launch of three turbo generators in Pavlodar and Petropavlovsk ahead of a schedule The total capacity of power plants reached 277 MW, which is quite impressive The new and upgraded equipment is more efficient because it allows to significantly reduce coal consumption, providing eco-nomic and environmental benefits: from 2009 to 2015, the Corporation reduced harmful emissions by 29%, ash emission concentration went down by 72%, nitrogen
oxide emissions – by 32%, sulfur oxides emissions – by 7% Some of the projects of 2015 include launch of a new cooling tower No 5 at Pavlodar CHP-3, ongoing construc-tion of ash dumps, reconstruction of power facilities and main heat networks
In the reporting year, CAEPCO JSC continued the im-plementation of EAM and ERP systems Major IT projects include opening of the Holding’s corporate Data Process-ing Center in Pavlodar Thanks to such solutions, CAEPCO JSC can ensure safety and integrity of customers’ person-al data, as well as first-class service thanks to smooth op-eration of all the modern information systems in use and easier ways to pay energy bills
In 2016, we will continue our efforts to reduce oper-ating costs and improve efficiency as part of our 2016–2020 Strategy As before, close attention will be paid to improving corporate governance, human resources poli-cies and environmental performance
LETTER OF THE PRESIDENT
YERKYN AMIRKHANOV PRESIDENT OF CAEPCO JSC
MANAGEMENT LETTER
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2015ANNUAL REPORT
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HISTORYCORPORATION OVERVIEW
2009
Establishing of CAEPCO JSC consisting of SEVKAZENERGO JSC, PAVLODARENERGO JSC and Astanaenergosbyt LLP Central-Asian power-energy company JSC is the only founder at the time of registration
European Bank for Reconstruction and Development purchased a 24 99% stake in CAEPCO JSC
2014
CAEPCO JSC consolidates 100% of Akmola electricity distribution company JSC
2015
Baiterek National Managing Holding, represented by its subsidiary funds becomes a shareholder 31 12 2015 the shareholder structure of CAEPCO JSC is as follows:
Central-Asian power-energy company – 57 37%European Bank for Reconstruction and Development – 24 16%Kaz Holdings Cooperatief U A – 11 22%KIF ENERGY S A R L – 4 35%Baiterek Venture Fund JSC – 1 45%CKIF ENERGY S A R L – 1 45%
2011
Islamic Infrastructure Fund (Kaz Holdings Cooperatief U A , Amsterdam) acquires a 12 89% stake and becomes a shareholder of CAEPCO JSC
2008
IN 2014CAEPCO JSC was recognized as “Largest private energy company” according to results of the rating “Ex-pert-200-Kazakhstan” Such evaluation is the result of implementation of the strategy of investment de-velopment being performed together with shareholders of CAEPCO JSC, among which European Bank for Reconstruction and Development (EBRD), Islamic Infrastructure Fund, established by Asian and Islamic Development banks (ADB and IDB) With their support CAEPCO JSC has implemented number of suc-cessful projects for reconstruction, modernization and construction of power facilities, providing complex settlement of financing issues, technical expertise and subsequent operation of facilities
CAEPCO JSC is a vertically integrated energy company, estab-lished on August 8, 2008 Total installed electricity capacity of CAEPCO JSC on 1st of January 2016 amounts to 1,141 MW – by this parameter the Corporation is a leader among private electricity generating companies of Kazakhstan Total installed heating capacity of the corporation is 2,918 Gcal/h Total length of electricity transmission lines is more than 50 thous km, length of heating networks is 994 km The Company provides electricity to more than two mln people
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CORPORATION OVERVIEW 2015ANNUAL REPORT
BUSINESS MODEL CORPORATION STRUCTURE
MAIN PRODUCTION HIGHLIGHTSTotal power line length, km
Power line types Pavlodar REDC North-Kazakhstan REDC Akmola EDC Total
220 kV 14,3 84,8 - 99,1
110 kV 2,785 2 1,327 1 2,513 6,625 3
35 kV 2,401 2 2,852 5 5,150 6 10,404 3
6–10 kV 6,114 7 4,574 3 7,411 5 18,100 5
0,4 kV 4,618 6 4,601 3 5,835 3 15,055 2
Total 15,934 13,440 20,910 4 50,284 4
Total heat network length, km
Pavlodar heat networks LLP 760 9
Petropavlovsk heat networks LLP 233 35
Total 994 25
Number of substations by type
Substation types Pavlodar REDC North-Kazakhstan REDC Akmola EDC Total
220 кВ 4 4 2 10
110 кВ 73 38 50 161
35 кВ 102 121 193 416
6–10 кВ 3,650 2,293 3,382 9,325
Total 3,829 2,456 3,627 9,912
Customers (export market)
Customers (domestic market)
External sources
KEGOC JSC
Heat networks
Energy company (CHP)
Sales company
electricity sold
transmission services
transmission of electricity
heat sold
electricity sold heat sold
transmission services
electricity sold
electricity sold heat sold
heat sold
Power networks
External sources
Installed capacity
Installed electricity capacity, MW 1,141
Installed heat capacity, Gcal/h 2,918
Number of customers by region
Region Electricity Heat
Pavlodar region 220,366 164,809
North-Kazakhstan region 161,196 70,561
Akmola region 117,310 -
Astana 227,667 205,721
Total 726,539 441,091
CENTRAL-ASIAN ELECTRIC POWER CORPORATION JSC
North-Kazakshtan regional electricity distribution
company JSC
SEVKAZENERGO JSC100%
Akmola EDC JSC100%
AEDC-Energosbyt LLP
Astanaenergosbyt LLP 100%
European Bank for Reconstruction and Development 24,16%
Central-Asian power-energy company JSC 57,37%
Kaz Holdings Cooperatief U A 11,22%
KIF ENERGY S A R L 4,35%
Baiterek Venture Fund JSC1,45%
CKIF ENERGY S A R L 1,45%
Petropavlovsk heat networks LLP
Sevkazenergosbyt LLP
PAVLODARENERGO JSC 100%
Pavlodar regional electricity distribution company JSC
Pavlodar heat networks LLP
Pavlodarenergosbyt LLP
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CORPORATION OVERVIEW 2015ANNUAL REPORT
Subsidiaries of Corporation actively implement cor-porate governance standards and improve its business processes and practices in accordance with international manufacturing, occupational health and social responsi-bility standards
PAVLODARENERGO JSC
PAVLODARENERGO Joint-Stock Company is a ver-tically integrated company composed of generation, transmission and distribution facilities in the city of Pav-lodar and Pavlodar region
Total installed capacity of power plants is 662 MW (electricity) and 2,240 Gcal/h (heat) Ekibastuz coal is the main fuel used
PAVLODARENERGO JSC supplies electricity in Pav-lodar region having a total area of 124 8 thous km2 and population of 758 6 thous people In 2015, electricity output reached 3,720 2 mln kWh
Electricity generated by PAVLODARENERGO is sup-plied to the markets of Pavlodar, Karaganda, Akmola
and East-Kazakhstan regions Total power line length is 15,934 km Total heat network length is 760 9 km
PAVLODARENERGO JSC consists of: y Pavlodar CHP-2; y Pavlodar CHP-3; y Ekibastuz CHP; y Pavlodar regional electricity distribution company JSC;
y Pavlodar heat networks LLP (heat networks in the cities of Pavlodar and Ekibastuz);
y Pavlodarenergosbyt LLP
SEVKAZENERGO JSC
SEVKAZENERGO Joint-Stock Company is a vertically integrated company composed of generation, transmis-sion and sales facilities in the city of Petropavlovsk and North-Kazakhstan region
As of the end of 2015, total installed capacity was 479 MW (electricity) and 678 Gcal/h (heat) Ekibastuz coal is the main fuel used
SEVKAZENERGO JSC supplies electricity in North-Ka-zakhstan region having a total area of 97,99 thous km2 and population of 579 thous people In 2015, electricity output reached 2,809 14 mln kWh
Electricity generated by SEVKAZENERGO JSC is sup-plied to the markets of the northern, central, eastern and southern regions of Kazakhstan with plans to export electricity to Russia, specifically to Kurgan and Omsk re-gions Total power line length is 13,440 1 km Total heat network length is 233 35 km
SEVKAZENERGO consists of: y Petropavlovsk CHP-2; y North-Kazakhstan regional electricity distribution company JSC (power networks in North-Kazakhstan region);
y Petropavlovsk heat networks LLP (heat networks in the city of Petropavlovsk);
y Sevkazenergosbyt LLP
SEVKAZENERGO’s operational stability was con-firmed by Fitch Ratings international rating agency which in 2015 affirmed the long-term Issuer Default Rating (IDR) for SEVKAZENERGO JSC at BB- Outlook is Stable
SUBSIDIARIES
AKMOLA ELECTRICITY DISTRIBUTION COMPANY JSC
Akmola EDC JSC transmits and distributes electricity among customers in Akmola region and the city of Asta-na The total area served is 121 thous km2 with a pop-ulation of 748 thous people Akmola EDC JSC operates 0 4–110 kV power networks across 14 administrative districts of Akmola region Subsidiary of Akmola EDC, Akmola EDC-Energosbyt LLP serves 117,310 customers in Akmola region The main energy supplier is Ekibastuz District Power Plant
Akmola EDC is a part of the National Electrical Grid of Kazakhstan Most of the companies in Akmola region, an industrial area with a cluster of enterprises of various forms of ownership, are connected to the company’s networks Akmola EDC JSC consists of a management company, three branches of inter-district power net-works and 14 district power networks Akmola EDC JSC also includes a subsidiary called Akmola EDC-Energosbyt LLP which purchases electricity and supplies it to con-sumers in Akmola region
The main goal of Akmola EDC JSC is to improve reli-ability of energy supply to customers in the Astana met-ropolitan area
ASTANAENERGOSBYT LLP
The company’s main area of business is supplying electricity and heat to customers in Astana As of Jan-uary 1, 2016, Astanaenergosbyt’s customers in Astana included 217,712 households and 9,955 legal entities The company’s main energy supplier is Astana-Energiya JSC (CHP-1 and CHP-2 in Astana)
Electricity purchased by Astanaenergosbyt is deliv-ered to customers using the networks of transmission companies such as KEGOC JSC, Akmola electricity distri-bution company JSC and Astana-REDC JSC, while heat is delivered using the networks of Astana-Teplotransit JSC
For the convenience of its customers, Astanaener-gosbyt LLP has 8 locations for accepting payments and a Call Center which processes data from electricity and hot water meters an provides information on issues related to energy supply
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CORPORATION OVERVIEW 2015ANNUAL REPORT
DEVELOPMENT STRATEGY
TO ACHIEVE THIS STRATEGIC GOAL, THE CORPORATION IS IMPLEMENTING THE FOLLOWING PROJECTS
Equipment reconstruction and mod-ernization at power generation facilities through investment programs, reducing accident risks and eliminating downtime
Reducing excessive losses during trans-mission of heat and electricity
Minimizing per-unit production costs for heat and electricity
Introduction of energy-saving and energy-efficient technologies in energy production and transmission
Maintaining certification for compliance with international environmental, occupa-tional health and safety standards
Continuous learning to enhance employee professionalism
Introduction of an automated enterprise management system
RATINGS
On June 1, 2015, Fitch Ratings confirmed CAEPCO JSC the following ratings:
y Long-term foreign currency Issuer Default Rating (IDR) at “ВВ-”, Outlook stable;
y Short-term foreign currency IDR at “B”; y Corporate long-term national currency IDR at “ВВ-”, Outlook stable;
y National long-term rating at “BBB+ (kaz)”, Outlook stable;
y Senior unsecured rating in national currency at “B+”; y Senior unsecured national scale rating at “BBB- (kaz)”
STRATEGY
CAEPCO’s strategic goal is to build a vertically integrat-ed private energy company providing customers with con-sistent and reliable services through the synergy of ener-gy generation, distribution, transmission and guaranteed sales of both electricity and heat
VISION
Central-Asian Electric Power Corporation JSC is a lead-er among private energy companies in Kazakhstan The Corporation operates in the most challenging climate con-ditions in the north of the country
The Corporation successfully uses the advantages of the holding structure, combining dynamism and flexibility of its elements (companies within the Group) with stabili-ty and reliability of centralized management on the Group level
The Corporation’s staff are a team of professionals constantly reaching for higher goals The Corporation’s relations with customers and suppliers are based on the principles of respect and mutual responsibility
Market expansion with guaranteed sales and low risk
Increasing production efficiency through technical improvement of production, upgrading main production facilities and infrastructure
Introduction of best management practices through continuous employee training on new efficient technologies in manufacturing and enterprise management
Introduction of promising projects through cautious innovation development
Market expansion
Management
Efficiency
innovation
MAJOR TARGETS AS PART OF ACHIEVING CAEPCO’S STRATEGIC GOAL
23
2015ANNUAL REPORT
22
MARKET ENVIRONMENT
OVERVIEW In 2015, economic growth in Kazakhstan was the lowest since the early 2000s For the first time in the past ten years, growth rates were below the world’s average According to the Ministry of National Economy of the Republic of Kazakhstan, GDP growth in 2015 was 1 2% (Real GDP – 101 2%, GDP deflator – 98 9%); according to the World Bank, Kazakhstan’s GDP grew by 0 9% The economic slowdown was caused by the slide in prices for energy and metals which are Kazakhstan’s main export items, reduced oil production and economic recession in the Russian Federation, Kazakhstan’s second largest trade partner
The growth driver of the national economy in 2015 was the services sector which showed stronger growth compared with the real economy (2 3% vs 0 1%) The services sector accounts for 57% of GDP, while manufac-turing and energy sectors account for 25 5% and 1 8% respectively
According to the Statistics Committee of the Minis-try of National Economy of the Republic of Kazakhstan, industrial output fell by 1 5% The drop was caused by reduced production in the mining sector which fell by 2 5%, slower growth in the manufacturing sector (0 2%), as well as a decline in the energy sector (-1 6%), water supply, sewerage, waste collection and distribu-tion (-8 9%)
A sharp drop in the added-value sector occurred in such energy-intensive industries as mechanical engineer-ing (-29 6%), metal products (-3 3%) and petroleum
products (-3 2%) The sector showed positive growth thanks to increased output of the steel industry (14 4%) which occurred due to increased production of non-fer-rous metals (23 6%)
Investments across the economy were rather moder-ate: in 2015 investments in fixed assets were 3 7% down from 4 2% in 2014 The main source of capital costs tra-ditionally are the companies’ own funds accounting for 58 1% of the total
MONETARY POLICY
In 2015, Kazakhstan’s monetary policy went through some radical changes, such as the introduction of float-ing exchange rate, inflation targeting and de-dollariza-tion of the economy Therefore, the year can be separat-ed into two periods
During the first period up to August 2015, the Na-tional Bank used foreign currency interventions to pro-tect USD-KZT exchange rate at 185–190 KZT per USD This affected the bottom lines of exporters of publicly traded commodities, as currency prices dropped signifi-cantly since 2014
The second period, from the 20th of August until the end of 2015, was the time of a floating exchange rate and transition from currency to inflation targeting There was a sharp increase in volatility in the foreign exchange
ECONOMIC OVERVIEW
Dynamics of production in the industry, %
200920082007
6
8
10
4
2
0
-2
-42010 2011 2012 20142013 2015
1.7-1.91.7
Industry Electricity
Source: Statistics committee of the Ministry of national economy of the RK
IN 2015
according to the Statistics Committee of the Ministry of National Economy of the Republic of Ka-zakhstan, total energy output by Kazakhstan’s power plants reached 91 07 bln kWh, 3 7% less than last year The reasons are optimized consumption inside the country and reduced electricity exports
Energy sector is a strategic asset of the economy of Ka-zakhstan which should promptly and fully meet the needs of businesses, households and authorities in electricity and heat Kazakhstan’s energy sector includes produc-tion (generation), transmission, distribution and supply of electricity and heat The main consumers of electricity are energy-intensive industrial enterprises (60%), most of which are in the mining and metallurgy sectors
Volume of KZT liquidity and rates for KZT loans (%, right scale)
0.30
0.35
0.40
0.25
0.20
0.15
14
16
18
12
10
8
Source: National Bank of the RK
M2/GDP Interest rates for the loans (right scale)
200920082007 2010 2011 2012 20142013 2015
24 25
MARKET ENVIRONMENT OVERVIEW
2015ANNUAL REPORT
market: tenge lost 54% of its value, with USD-KZT ex-change rate dropping from 185 KZT in August to 344 KZT per USD in December The share of deposits denom-inated in foreign currency increased from 56% in De-cember 2014 to 69% in December 2015, while the share
of loans denominated in foreign currency rose from 29% to 34% 2015 was the time of insufficient tenge volume liquidity, with the ratio of money supply to GDP almost reaching a historical low
CONSUMER MARKET
For the consumer market, 2015 was one of the most difficult years over the past decade With the target cor-ridor of 6-8% that remained unchanged after the transi-tion to a floating exchange rate and a sharp drop in KZT value, inflation in 2015 was 13 6% It is the second high-est inflation spike since 2007
Retail sales dropped 0 4%, while real household incomes increased by a modest 0 7% Employment in-creased by merely 0 3%
Purchasing activity of consumers was hampered by a limited number of personal loans As of December 2015, household debt reached 4 16 KZT trln, an increase of 3 7% compared with December 2014 To put things in perspective, household debt used to grow 18% every year during the period between 2011 and 2014
The rise in electricity prices was 8 3%, which is 5 2% less than inflation Overall, in 2015 electricity prices showed one of the lowest growth since 2007 and have been below the consumer price index during the past two years
FORECAST FOR 2016
In October 2015, the International Monetary Fund predicted that Kazakhstan’s economy will grow 2 4% in 2016 At the end of 2015, the World Bank predict-ed 1 1% growth A report published by Moody’s rating agency early in 2016 mentioned a growth of 1% in 2016
According to analysts of the World Bank, econom-ic slowdown in Kazakhstan will be affected by limited growth of external and internal demand caused by re-duced oil prices and economic recession in the Russian Federation Additional pressure on the domestic market will come from the volatile exchange rate
Kazakhstan’s downgraded sovereign credit rating and corporate debt rating of Kazakhstani companies as
a result of low oil prices, in addition to expected capital flight from emerging markets, will raise borrowing costs for Kazakhstani companies from both the real economy and the services sector
Faster economic growth is expected in 2017–2018 The Current Forecast of socio-economic development of Kazakhstan in 2016–2020 prepared by the Ministry of National Economy (published in March 2016) describes three scenarios for the world economy whose growth rates will determine Kazakhstan’s GDP growth Accord-ing to the optimistic scenario, economic growth in the United States and the EU, more dynamic than it used to be in the past, will have a positive impact on the global
GDP – up to 4% annually during 2016–2017; the price of Brent oil will be 40 US dollars per barrel The base-line scenario takes into account the global GDP growth of 3 7% with the Brent oil price of 30 US dollars per barrel According to the pessimistic scenario, the world econo-my will grow by 3%, while the price of Brent oil will drop to 20 US dollars per barrel
In the Forecast, the GDP growth (baseline scenario) in 2016 is 0 5%, while in dollar terms the country’s econ-omy will shrink from USD 186 6 bln to USD 122 7 bln The manufacturing sector will contract by 2%, while the most severe decline (up to 5%) will be in the mining sec-tor, the added-value sector will grow by 1 4%, and the energy sector will grow by 0 3% Construction sector will show a moderate growth of 2 5% down from 4 3% in 2015 The unemployment rate will remain at 5% Dynamics of retail sales and real incomes
of people, %
10.0
15.0
20.0
5.0
0
-0.5
Source: Statistics committee of the Ministry of national economy of the RK
200920082007 2010 2011 2012 20142013 2015
Retail trade turnover Real money incomes of people
Forecast of Kazakhstan GDP growth, %
Moody’s (March 2016)
International Monetary Fund (October 2015)
S&P (October 2015)
The World Bank (December 2015)
Ministry of national economy
of the RK
5
4
3.3
3
2.4
1
1.1
0.5
2017 2016
0 1 2 3 54
Source: Statistics committee of the Ministry of national economy of the RK
Source: National Bank of the RK
Dynamics of an inflation and prices for electric energy, %
15
20
25
30
10
5
0
CPI Electricity prices
200920082007 2010 2011 2012 20142013 2015
Energy sector is a strategic asset of the economy of Kazakhstan which should promptly and fully meet the needs of businesses, households and authorities in elec-tricity and heat Kazakhstan’s energy sector includes production (generation), transmission, distribution and supply of electricity and heat
The main consumers of electricity are energy-inten-sive industrial enterprises (60%), most of which are in the mining and metallurgy sectors
ELECTRICITY OUTPUT
Kazakhstan has 111 power plants (total installed ca-pacity – 21,307 MW, available capacity – 17,503 MW)
The structure of this market is as follows The first group includes heat power stations (TPSs,
including gas turbine heat power stations, or GTTPSs) TPSs account for about 89% of electricity generation in Kazakhstan Coal-fired and gas turbine heat power sta-tions account for 80% and 9% respectively
The country’s largest power plants are Eurasian En-ergy Corporation, Ekibastuz CHP-1 (Samruk-Energo),
ENERGY SECTOR OVERVIEW
Source: Statistics committee of the Ministry of national economy of the RK
Production of electric energy in Kazakhstan, bln kWh
200920082007
80
85
90
95
100
75
70
65
60
2010 2011 2012 20142013 2015
76.6
80.378.7
82.686.6
90.6 92.694.6
91.1
26 27
MARKET ENVIRONMENT OVERVIEW
2015ANNUAL REPORT
The regional structure of energy production re-mained unchanged Up to 40% of electricity is produced in Pavlodar region, where the country’s two largest pow-er plants, Ekibastuz CHP-1 and Ekibastuz CHP-2, as well as Aksu power plant and three CHP plants in Pavlodar Karaganda region accounts for 17%, whereas 10% of
electricity is produced by heat and hydroelectric power stations of the East-Kazakhstan region, and 7% by pow-er plants in Almaty region and the city of Almaty The remaining 10 regions account for less than 30% of elec-tricity generation
TRANSMISSION, DISTRIBUTION AND SUPPLY OF ELECTRICITY
The main networks connecting Kazakhstan’s Na-tional Electrical Grid with the grids of neighboring coun-tries, as well as regions within Kazakhstan, are owned by KEGOC JSC, system operator of the energy market in Kazakhstan (90% is owned by Samruk-Kazyna sovereign wealth fund) KEGOC operates 355 overhead power lines
with a voltage range of 0 4–1,150 kV and total length of 24,979 km Furthermore, KEGOC operates 77 substa-tions with voltage of 35–1,150 kV installed transformer capacity of 36,244 55 MVA
Distribution is carried out by 20 regional energy com-panies (RECs) and 150 small transmission companies
Ekibastuz CHP-2 (Samruk-Energo and Inter RAO UES), Topar CHP (Kazakhmys Energy), and Zhambyl CHP are coal-fired heat power stations with multiple high pow-er units that generate 40–50% of all electricity in Ka-zakhstan These enterprises are also key suppliers on the wholesale electricity market Ekibastuz CHP-1 and Eki-bas tuz CHP-2 export electricity to Russia
Heat power stations also include industrial cogene-ration power plants concentrated in regions with mining and metallurgical clusters such as Karaganda, Kostanay, Pavlodar and Aktobe regions The group includes coal-fired heat power stations with one or two high or me-dium power generator units such as Karaganda CHP-3 (Karaganda-Energocenter), Karaganda CHPP-PVS and CHP-2 (ArcelorMittal Temirtau), Balkhash and Zhezkaz-gan CHP (Kazakhmys Energy), Pavlodar CHP-1 (Alumin-ium of Kazakhstan), Rudnensk CHP of SSGPO and Kaz-chrome’s CHP Normally, these power plants are part of vertically integrated mining and metallurgical holdings
Heat power stations also include cogeneration power plants which focus primarily on regional customers such as large companies, SMEs and households The group is represented by power plants that make up CAEPCO JSC (Pavlodar CHP-2, Pavlodar CHP-3, Petropavlovsk CHP-2, Ekibastuz CHP), Astana Energy (Astana CHP-1, Astana CHP-2), AES group of companies in Kazakhstan (Ust-Kamenogorsk CHP, Sogra CHP), etc
Gas turbine heat power stations (in Kazakhstan these are medium power stations) focused on supplying elec-tricity to industrial customers (oil and gas fields) and nearby communities This group also includes Zhanazhol GTTPS, Tengizchevroil GTTPS and Akshabulak GTTPS
The second group includes hydroelectric power sta-tions (HPS) used for load adjustment in the National Electrical Grid (responding to peak demand) The biggest
stations are Buhtarminsk Hydroelectric Power Complex, AES Ust-Kamenogorsk HPS, AES Shulbi HPS and Moinak HPS They accounted for up to 11% of electricity gener-ation
The third group includes wind and solar power plants Promoting such generating sources is part of the govern-ment strategy to reduce the share of hydrocarbon energy sources in the energy mix These stations include, Kor-dai WPS, Kapshagai SPS, K-1 Wind Power Station, etc The capacity of these power stations is rather low (rated capacity of Ermentau WPS, the largest one, is 45 MW) Wind and solar power stations account for 0 12% of the country’s electricity generation
According to the Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan, to-tal energy output by Kazakhstan’s power plants reached 91 07 bln kWh, 3 7% less than last year (94 64 bln kWh) The reasons are optimized consumption inside the coun-try and reduced electricity exports
Less energy was produced by such large energy gen-erating facilities are Ekibastuz CHP-1, Ekibastuz CHP-2, Eurasian Energy Corporation More energy was produced by the CHP of Kazakhmys Energy, PAVLODARENERGO, SEVKAZENERGO, Karaganda-Energocenter and Almaty Power Stations
Net power flow in IES of Kazakhstan, mln kWh
-100
0
100
200
300
-200
-300
March
Feb
Jan
Apr
May
June Aug
July Sep
Oct
Nov
Dec
2014 2015
Source: KOECM
Ten largest energy producing companies of Kazakhstan for generation in 2015, bln kWh
Kazakhmys Energy CHP
Ekibastuz CHP-1
Ekibastuz CHP-2
Bukhtarminsk HPC
SEVKAZENERGO
CHP named Baturov
EEC
AlES
PAVLODARENERGO
Karaganda-Energocenter
0 2 4 6 10 1614128
Source: KOECM
2014 2015
25%
2000 2005
Structure of energy production by regions of Kazakhstan, %
Pavlodar
Karaganda
Almaty
East-Kazakhstan
Others
41%17%
6%
11%
2010 2015
44%
6%
9% 39% 17%
7%
10%
28%
Sources: Statistics committee of the Ministry of national economy of the RK and KOECM
37%
20%
7%
13%
22%
27%
14%
28 29
MARKET ENVIRONMENT OVERVIEW
2015ANNUAL REPORT
that control regional electrical networks with voltage range of 0 4–220 kV Among RECs there are both public and private companies Households get electricity from more than 200 energy suppliers
Peak loads occur in autumn and winter In 2015, 52 8% of electricity was generated and 53 6% was con-sumed during the period between September and Feb-ruary The consumption peaked in December reaching 9 32 bln kWh, and the lowest point was 6 68 bln kWh in June
PRODUCTION, DISTRIBUTION AND CONSUMPTION OF HEAT
The heat supply system in Kazakhstan, consisting of heat sources, heat networks and heat consuming units, emerged during the Soviet period and was based on the concept of district heating systems (DHS) with a signifi-cant share of major heat sources Therefore, most urban area in about 90 cities in Kazakhstan are connected to DHS
In Kazakhstan heat is produced by 40 CHP plants, 28 boiler stations which are considered to be large (with ca-pacity over 100 Gcal/h) and 5 6 thous small boiler sta-tions (with capacity below 100 Gcal/h) CHP plants and large boiler stations generate 80% of heat, while smaller boiler stations account for the remaining 20% According to the latest official estimate, total double-pipe length of heat networks (2014) in Kazakhstan was 12 thous km, with the wear level exceeding 71% and technical losses reaching 25% The majority of heat networks is in mu-nicipal ownership
In 2015, Kazakhstan’s CHP plants and boiler stations produced 78 74 mln Gcal of heat, which is 3% less than in 2014
These data confirm that heat production has been de-clining since 2013 The average annual slide over the past three years is 9% To decline in production was caused by several factors: modernization of heat networks which leads to lower technical losses, as well as the introduc-tion of energy efficiency programs at the consumer level throughout the country
Heat is a social commodity One of its main consum-ers is the housing and utility sector (including 22 thous public amenities and approximately 160,000 apartment
buildings) which traditionally consumes up to 40% of heat energy produced in the country
Heating season in Kazakhstan begins in Septem-ber-November and ends in April-May (depending on how soon the average daily temperature goes below or above 8–10 °C) Normally, peak demand in the con-sumption of heat and electricity occur at the same time In 2015, heat consumption peaked in January (11 6 mln Gcal)
PRICES FOR ELECTRICITY AND HEAT
Energy companies in Kazakhstan are monopolies and therefore are regulated by a specialized government authority Today, this is the Committee on Regulation of Natural Monopolies and Protection of Competition un-der the Ministry of National Economy of the Republic of Kazakhstan The markets with companies operating in the field of transmission and distribution of electricity and heat are regulated by the Committee
Under the current laws, the tariffs of energy trans-mission companies should guarantee compensation of operating expenses (necessary for the provision of reg-ulated services), as well as capital expenses (investment program)
During 2009–2015, all energy generating companies had to live with ceiling tariffs under the government’s program “Tariffs In Return For Investments”, which in-cluded investment costs to promote investment in the modernization of generation facilities The Energy Min-istry of Kazakhstan monitored the execution of agree-ments on investment commitments In 2015, the Gov-ernment of Kazakhstan decided that the Program would continue until 2018
Starting from 2016, electricity and heat suppliers base their pricing on 5-year ceiling tariffs This approach is aimed at enhancing the investment attractiveness, tran-sition of natural monopolies into competitive businesses and providing greater certainty to all market participants:
energy companies can plan their investments, while con-sumers can count their costs
According to the Statistics Committee of the Ministry of National Economy, in 2015 final retail prices for elec-tricity and heat rose by 8 3% and 14% respectively The growth in electricity prices was among the lowest over the past decade On the contrary, heat prices showed the highest growth over the last years
INVESTMENT PROJECTS
In 2015, capital investments in the energy sector de-clined by 7 4% This is a record low during the period be-tween 2007 and 2015 Foreign investment in the sector has declined significantly
Investments were quite substantial during 2009–2015 mostly thanks to the ceiling tariffs program Ac-cording to the Energy Ministry, during the implementa-tion of the ceiling tariffs policy, more than 900 KZT bln were invested in the energy sector, which has restored old or add new facilities with total capacity of 2,764 MW during 2009–2014, which meets the economy’s energy needs completely Generating capacity totaling 160 MW was to enter service in 2015 with planned investments of 172 KZT bln
In 2015, several significant projects were completed in Kazakhstan’s energy sector Turbo generator K-63-90 was put into operations at Petropavlovsk CHP-2, in-creasing the installed capacity by 21 MW to 455 MW Two turbo generators were put into operations at Pav-lodar CHP-3: PT-65/75-130-13 and T-120/130-130PR2,
Production and consumption of electric energy in Kazakhstan in 2015, bln kWh
8.5%
9.0%
9.5%
8.0%
7.5%
7.0%
6.5%
Source: KOECM
Production Consumption
March
Feb
Jan
Apr
May
June Aug
July Sep
Oct
Nov
Dec
Production of heat energy in Kazakhstan, mln Gcal
80
90
100
110
70
60
93.294.1
93.496.1
98.0103.4
94.1
81.178.7
Source: Statistics committee of the Ministry of national economy of the RK
200920082007 2010 2011 2012 20142013 2015
Source: Statistics committee of the Ministry of national economy of the RK
Growth of tariffs for electric and heat energy in Kazakhstan, %
200920082007
15
20
25
30
10
5
0
2010 2011 2012 20142013 2015
Electricity Heat
Dynamics of the investments to the power sector of Kazakhstan, %
200920082007
30
40
50
60
70
20
10
-10
0
2010 2011 2012 20142013 2015
Source: Statistics committee of the Ministry of national economy of the RK
30 31
MARKET ENVIRONMENT OVERVIEW
2015ANNUAL REPORT
bringing the installed capacity of the plant to 540 MW, while the share of upgraded basic equipment reached 67%
A major project was implemented by Samruk-Ener-go: the company’s Ereymentau wind farm with installed capacity of 45 MW was put into commercial operations The plant capacity will increase to 90 MW in the near fu-ture, while according to long-term plans the wind farm will eventually have capacity of 300 MW
The upgraded hydroelectric generator set No 3 put into operations at Ust-Kamenogorsk HPS, while the hy-droelectric generator set No 2 began to be upgraded Both projects are designed to increase the station’s ca-pacity to 18 MW
Some major projects are taking place in the network sector In 2015, KEGOC continued the construction of the 500 kV line “Ekibastuz – Shulbi HPS – Ust-Kame-nogorsk” stretching 600 km (218 km were built in one year with a total of 348 km completed), construction and installation works began at 500 kV substation “Semei”, 500 kV substation “Ust-Kamenogorsk” and 1,150 kV substation “Ekibastuz”
According to estimates of the Energy Ministry, the energy sector will need a total of 5 KZT trillion of invest-ments during 2016–2030
MARKET PROSPECTS
In the short term, the evolution of Kazakhstan’s ener-gy sector will be influenced by several key factors
The first is negative trends in the national economy due to declining external demand and industrial output And although metallurgy, the main industrial consumer of electricity, is not slowing down, production declines in other sectors, for example, sliding 16% in freight rail transport
The second factor resulting from excess capacity is potential drop in electricity prices on the domestic mar-ket With insufficient sources of capital expenditures and given the high level of wear and tear of basic equipment across the system, after 3–5 years the least modernized enterprises will have trouble maintaining the current out-put and thus their market share
However, two major projects in the energy transmis-sion sector are going to be completed in the next few years: construction of the power line “Ekibastuz–Semei–Ust-Kamenogorsk” and “Semei–Aktogai–Taldykorgan–Almaty” (a 500 kV “North–East–South” transit project) The goal of these projects is to increase the transmission capacity of the national grid from North to South (North has excess energy, while South faces energy deficit) from today’s 1,350 MW to 2,100 MW, create conditions for
electrification of railway sections Aktogai–Moiynty, Ak-togai–Almaty, Aktogai–Dostyk, provide access to large amounts of electricity to existing and newly built metal-lurgical enterprises in East-Kazakhstan Region (Aktogai Mining and Concentration Complex of KAZ Minerals, etc )
Greater transmission capacity and new consumers will definitely increase competition on the Kazakhstani electricity market
Further, the second phase of Kazakhstan’s 2011–2020 housing and utility infrastructure modernization program will be implemented during 2016–2020, and one of its goals is to upgrade the country’s utilities, in-cluding electric power and heating infrastructure The program should significantly reduce fuel consumption for electricity and heat generation Energy-saving tech-nologies are used during the modernization During the second phase of the program between 2016 and 2020, the share of objects in need of repair should drop from 50% to 40% for heat networks and from 63% to 53% for the transmission network
By July 1, 2016 the member states of the Eurasian Economic Union (EEU) expected to adopt a program for creating a joint electricity market in the EEU which will become effective as of 2019 The idea behind this is to increase competition on the domestic market
Inflow of foreign direct investments to the power sector of Kazakhstan, USD mln
200920082007
200
300
400
500
600
100
60
2010 2011 2012 20142013 2015*
37
130
526
102 124
262
344
254
47
Source: National Bank of the RK
* results of first three quarters
202520202015
10,000
15,000
20,000
25,000
5,000
60
2030
16,000
18,500 20,500 23,600
Maximum volume of consumed electric capacity of Kazakhstan power stations, MW
Source: Ministry of Energy of the RK
33
2015ANNUAL REPORT
32
PERFORMANCE AND DEVELOPMENT
PROSPECTS OVERVIEW
49 6%
PAVLODAR CHP-2No 1 boilerNo 2 cooling tower (new)
PETROPAVLOVSK CHP-2No 1 turbo generator (new)No 4 turbo generator (new)No 6 turbo generator No 7 turbo generator No 6 boiler No 7 boiler No 8 boiler (new)
PAVLODAR CHP-3No 1 turbo generator (new)No 2 turbo generator (new)No 4 turbo generator No 5 turbo generator No 1 boiler (new)No 2 boiler No 3 boiler No 5 cooling tower (new)
EKIBASTUZ CHPNo 1 turbo generatorNo 6 boiler (new)
GROWTH
23%
211 MW
installed electricity generation capacity
21%
mln kWh
electricity output
270 thous Gcal
5%
heat output
5%
installed heat generation capacity
147 Gcal/h
by 72%
REDUCED
generating capacity
UPGRADED
MODERNIZATION AND RECONSTRUCTION
ash emissions
CAEPCO’s track record for the period between 2009 and 2015
RESULTS OF INVESTMENT PROJECTS DURING THE CEILING TARIFFS PROGRAM (2009–2015)
One of the key aspects of the strategic development of CAEPCO JSC is to increase production efficiency by up-grading fixed assets The Corporation is implementing a large-scale investment program for the modernization and reconstruction of its fixed assets
During CAEPCO’s investment projects between 2009 and 2015, as part of the Ceiling tariffs Program, 78 KZT bln were invested by the Corporation, which is 7 9% of to-tal investments in Kazakhstan
IN 2015
electricity output reached 6,529 4 mln kWh, rising by 7 4% compared with 2014 The increase was achieved thanks to the addition of two turbo generators at Pavlodar CHP-3 and one at Petropavlov-sk CHP-2
Heat generation in 2015 totaled to 6,272 8 thous Gcal sliding 5% compared to 2014 due to lower heating needs as a result of higher average temperature during the heating season of 2015 and reduced technical losses in heat networks
CAEPCO JSC holds 3rd place in the power industry of Kazakh-stan by the volume of capital expenditures for the renovation and reconstruction of production assets For the period of 2009-2020 planned volume of the Corporation investments amounts to 192 KZT bln Within the frames of the investment program the activities are implemented in three directions: increase of generation, energy saving, including reduction of electricity and heat losses upon transmission, enhancing of environmental parameters of the production
34 35
PERFORMANCE AND DEVELOPMENT PROSPECTS OVERVIEW
2015ANNUAL REPORT
INCREASED GENERATION
A new turbo generator No 1 was installed at Pavlodar CHP-3 during 2011–2012 increasing the plant’s capacity from 440 MW to 505 MW The introduction of an au-tomatic operational control system allowed to adopt a cost-effective and safe mode of operation, maintain re-quired parameters for steam and heat supply automatical-ly, maintain required equipment temperatures and stable required load
A new turbo generator No 5 entered service at Pav-lodar CHP-3 in December 2014, and new turbo genera-tors No 2 and No 4 was put into operations in June and November 2015 respectively, brining installed capacity to 540 MW up from 505 MW A new cooling tower No 5 entered service in summer 2015 These measures helped to increase the available capacity of CHP-3 and make it ca-pable of carrying heavier load during summer thanks to improved condensator vacuum at the plant’s turbines
In 2012, a new cooling tower No 2 was put into oper-ations at Pavlodar CHP-2, which allowed to lift restrictions on condensed power generation
In May 2009, a turbine No 1 with installed capacity of 12 MW designed for steam-powered electricity gener-ation was put into operations at Ekibastuz CHP, providing electricity for the plant’s own needs
During 2011–2015, five boiler units were renovated at Pavlodar CHP-2, Pavlodar CHP-3 and Ekibastuz CHP:
y in 2011, boiler unit No 1 at Pavlodar CHP-2 went through renovation, including boiler drum replace-ment
y A replaced boiler unit No 1 entered service at Pav-lodar CHP-3 in 2012, and boiler units No 3 and No 2 were upgraded during 2014–2015
y In 2014, a replaced boiler unit No 6 with steam gen-eration capacity increased by 15 tons per hour en-tered service at Ekibastuz CHP
The completed projects allowed to achieve greater equipment reliability and performance, as well as lower harmful emissions into the atmosphere
Boiler units Nos 6 and 7 at Petropavlovsk CHP-2 in 2012 and a new boiler unit No 8 was added in 2014 As a result, steam generation capacity of each boiler unit in-creased by 50 tons per hour In 2013 the installed capac-ity of Petropavlovsk CHP-2 grew to 54 MW thanks to the launching the two turbo generators: reconstruction and modernization of turbo generator No 4 was completed with its turbine capacity doubled, reconstruction of turbo generator No 6 was completed with its electrical power rising by 24 MW
Modernization of boiler unit No 12 began in 2012, which should increase steam generation capacity by 50 tons per hour NOx emissions cut by 3 times Turbo gen-erator No 1 was put into operations in September 2015, increasing the installed capacity by 21 MW After the in-stallation of new equipment, the plant’s installed capacity rose by 51 MW to 455 MW up from 404 MW The recon-struction of turbo generator No 7 increased the turbine’s installed and available capacity by 24 MW Modernization of turbo generator No 5 is currently underway and is ex-pected to increase the plant’s installed capacity by 62 MW to 541 MW up from 479 MW
IMPROVED ENVIRONMENTAL PERFORMANCE
In order to improve its environmental performance, as part of its investment program, the Corporation upgraded its fly ash collectors adding 2nd generation battery wet-type fly ash collectors on boiler units at each of the Corpo-ration’s power plants, cutting coal ash emissions into the atmosphere by 6 times
During 2009–2015, the Corporation reduced harmful emissions by 29% At the end of 2008, before the start of the investment program, CAEPCO’s facilities released a total of 108 5 thous tons of harmful emissions into the atmosphere As of 2015, we are talking about 77 thous tons
During 2009–2014, titanium wet-type fly ash collec-tors were installed on all boiler units at PAVLODAREN-ERGO’s power plants and SEVKAZENERGO’s CHP-2 All these measures allowed to improve flue gas purification and reduce the plants’ environmental costs
Reconstruction of one existing ash dump and con-struction of two new ones are currently under way with a view to ensuring continuity of the plant’s technological cycle and allowing slag waste storage for up to 25 years The construction of the 2nd phase of the ash dump at Eki-bas tuz CHP in a bed of Lake Tuz began in 2015, while the construction of phase 2 of ash dumps at PAVLODARENER-GO’s CHP-3 and CHP-2 continued The use of innovative materials such as Canadian polysynthetic geomembrane for waste containment allows to completely eliminate the risk of harmful substances penetrating into the soil
PRODUCTION OF ELECTRICITY AND HEAT
In 2015, the Corporation continued to implement its investment program During the year, thanks to modern-ization and reconstruction of main production assets, the following changes in the installed electricity and heat generation capacity were achieved:
y Turbo generator No 2 with installed capacity of 65 MW and 190 Gcal/h (up from 60 MW and 118 Gcal/h) was put into operations at Pavlodar CHP-3 in June 2015;
y Turbo generator No 4 with installed capacity of 125 MW and 188 Gcal/h (up from 110 MW and 160 Gcal/h)was put into operations at Pavlodar CHP-3 in November 2015; The new equipment brought the capacity of Pavlodar CHP-3 to 540 MW up from 520 MW and to 1,126 Gcal/h up from 1,026 Gcal/h
y Condensator-type turbo generator No 1 with in-stalled capacity of 63 MW (up from 42 MW) was put into operations at Petropavlovsk CHP-2 in September 2015; The plant’s installed electricity generation ca-pacity increased to 479 MW up from 434 MW
Electricity output in 2015 reached 6,529 4 mln kWh, rising by 7 4% compared with 2014 The increase was achieved thanks to the addition of two turbo generators at Pavlodar CHP-3 and one at Petropavlovsk CHP-2
Heat generation in 2015 totaled to 6,272 8 thous Gcal sliding 5% compared to 2014 due to lower heating needs as a result of higher average temperature during the heating season of 2015 compared with 2014 (-5 4 °C vs -7 3 °C) and reduced technical losses in heat networks
In the reporting year, electricity and heat trans-mission and distribution figures remained virtually un-changed compared with the previous year at 5,730 mln kWh (electricity) 10 264 mln Gcal (heat)
The share of CAEPCO in Kazakhstan’s electricity gen-eration increased by 0 7% thanks to a 7 4% increase in CAEPCO’s electricity output and a 3 0% decline in power generation throughout Kazakhstan in 2014
RESULTS IN 2015
Item 2013 2014 2015
Installed electricity generation capacity, MW 1,061 1,076 1,141
Electricity output, mln kWh 6,137 6,081 6,529
Electricity transmitted, mln kWh 5,769 5,816 5,730
Electricity sold, mln kWh 7,154 7,357 6,732
Share in Kazakhstan’s total electricity generation, % 6 7 6 5 7 2
Installed heat generation capacity, Gcal/h 2,895 2,932 2,918*
Heat output, thous Gcal 6,132 6,605 6,273
Heat transmitted, thous Gcal 4,408 4,625 4,545
Heat sold, thous Gcal 9,567 10,448 10,264
* Due to remarking of the turbine No 7 at Petropavlovsk CHP-2
36 37
PERFORMANCE AND DEVELOPMENT PROSPECTS OVERVIEW
2015ANNUAL REPORT
REDUCTION OF ELECTRICITY AND HEAT LOSSES
CAEPCO constantly takes measures to reduce heat and electricity losses during transmission and improve the reliability of supply to consumers
In 2015, thanks to the introduction of AECMS for households and reconstruction of 0 4 kV high-voltage power lines using SIP wire to improve energy savings, CAEPCO completely eliminated excessive network losses and reduce technical losses
In 2015, PAVLODARENERGO JSC reduced technical los-ses to 8 78% down from 9 08%, while SEVKAZENERGO reduced its technical losses to 9 7% down from 10 2%
As part of its initiative to reduce network losses, CAEPCO replaced a total of 12,591 induction electricity meters with electronic ones and also replaced 80 4 kilo-meters of bare wires with SIP wire Furthermore, CAEP-CO’s power distribution companies repaired a total of 164 6 km of overhead lines with voltage of 110–35 kV, 155 3 km of overhead lines and underground cables with voltage range of 10–0 4 kV
The main efforts to reduce heat losses include res-toration and upgrading of district heating pipelines in Pavlodar, Ekibastuz and Petropavlovsk Funding for in-vestments comes from EBRD loans in cooperation with the Foundation for Clean Technologies with a view to improving the reliability of heat supply, energy efficiency as well as reducing losses and improving environmental performance by reducing СО2 emissions due to lower coal consumption thanks to reduced heat losses in the networks
The reduction of heat losses during transportation is carried out in an integrated manner In 2015, the main heat networks in Pavlodar and Ekibastuz with a total length of 970 m and 2,217 m respectively were renovat-ed using pre-insulated pipes In Petropavlovsk, isolation was restored on pipes with a total length of 5,078 m In addition, replacement of obsolete equipment is continu-ous process
During 2011–2015, thanks to an EBRD loan, CAEP-CO’s heat transmission facilities upgraded heat networks in Pavlodar and Petropavlovsk with a total length of 7,688 m and 9,120 m respectively Insulation was up-graded to PPU foam on heat pipes in Pavlodar, Ekibastuz and Petropavlovsk with total lengths of 3,570 m, 1,640 m and 9,476 m respectively
In the reporting year, Pavlodar Heat Networks LLP and Petropavlovsk heat networks LLP signed contracts with KazNIPI Energoprom Institute covering 20 projects aimed at heating network reconstruction of isolation re-placement in Pavlodar, Ekibastuz and Petropavlovsk In their projects the companies will use PPU foam pre-insu-lated pipes with a total length of 112,013 m total length of the pipeline, of which Pavlodar heat networks and Petropavlovsk heat networks account for 86,889 m and 25,124 m respectively
These plans are part of CAEPCO’s 2016–2020 invest-ment program which will be funded with the company’s own funds, an investment loan from the EBRD and gov-ernment subsidies from the Ministry of National Econ-omy of the Republic of Kazakhstan under “Nurly Zhol” program
The Company’s heat transmission facilities are equipped with automatic heat controllers, industrial con-trollers and modems for connecting mechanisms and in-strumentation with the dispatch service All equipment at heat distribution facilities is connected into a single net-work, which allows dispatchers to quickly control water pressure and temperature, while professionals can make quick decisions in case of any accident or emergency
Furthermore, the Company uses advanced technolo-gy to detect the causes of heat losses: heat imaging de-vices for pipeline monitoring and diagnostics, as well as ultrasonic flaw detectors
All the above measures will reduce total heat loss in networks by 4 8% by the end of 2016
FINANCIAL AND ECONOMIC HIGHLIGHTS
The consolidated financial statements of the Corpo-ration for 2015 were prepared in accordance with the National financial reporting standards (hereinafter, the NFRS) and include statements of the subsidiaries only from the date of their acquisition Accounting policies are applied to all businesses of the Corporation
Key financial and economic indicators of the Corpo-ration demonstrate the effectiveness and efficiency of operational and financial activities, as well as its perfor-mance in line with the primary directions of its strategic development
Key financial and economic indicators for 2013–2015, KZT mln
INDICATORS 2013 2014 2015
Operating income 94,137 107,783 107,932
Сost including period expenses (79,167) (91,996) (93,816)
Profit from operating activities 14,970 15,787 14,116
Total EBITDA for the year* 21,733 24,034 24,885*
Total EBITDA for the year, margin in % 23 1% 22 3% 23 1%
Income tax expenses (3,272) (3,603) 727
Net profit for the year 10,390 10,982 (7,614)
Assets 183,114 254,030 279,131
Equity 104,244 139,871 129,622
Capital expenditures on fixed assets 23,177 33,982 32,441
* Total EDITDA is stated excluding the impact of the exchange rate difference
REVENUE FROM SALES OF PRODUCTS/SERVICES
According to 2015 results, the Corporation produced electric and heat energy, including the transmission and sale of purchased energy, for a total of 107,688 KZT mln, which is 0 1% higher than in 2014, that is associated with the increase in the supply of electric power, generated on the Corporation’s power plants, and declining purchase of electric power by distribution companies from external energy sources
Dominant factors, impacting the income level from the sales of 2015 in comparison with the previous peri-od, are as follows:
y Electric power sales increased in comparison with 2014 at 296 KZT mln or 0 5% due to the increase in generation of the own electric power for 440 mln kWh (9,3%), caused by the commissioning of new generating capacity as a result of the investment programme and the positive demand dynamics from consumers
y The revenues from electric power transmission are slightly reduced by 856 KZT mln or 4% due to de-crease in energy transmission for 1 5% and structural changes in the “Electric power transmission” seg-ment
y The revenues from sales of heat energy inclusive of transmission services and sales margin grew by 3% due to sales and transmission companies tariff in-crease, despite the fact that the heat delivered to cus-tomers decreased for 183 thous Gcal or 1 8%, due to the high outside temperature during the heating season
y Average tariffs by type of energy have increased, electric power for 0 96 tenge/kWh or 8 5%, heat energy for 107 54 tenge/kWh or 4 5%
38 39
PERFORMANCE AND DEVELOPMENT PROSPECTS OVERVIEW
2015ANNUAL REPORT
ASSETS AND LIABILITIES
Total assets of the Corporation by December 31, 2015 accounted for 279,131 KZT mln, which is 9 9% higher than in 2014
As of December 31, 2015, the value of fixed assets amounted to 228,988 KZT mln, or 82% of the value of all assets As part of a major investment programme for 2015, the sum of 32,441 KZT mln was allocated for un-finished construction and acquisition of fixed assets, the value of new and renovated facilities of current period and transferred from previous years, which were com-missioned, totalled 35,797 KZT mln In particular, this related to the commissioning of two new turbines No 2
and No 4 at the Pavlodar CHP-3 in June and in November 2015 respectively, and turbine No 1 at the Petropavlovsk CHP-2 in September 2015, completion of the construc-tion of cooling tower No 5 at the Pavlodar CHP-3 Al-so continues the 2-nd phase of the construction of ash dumps of the Pavlodar CHP-2, Pavlodar CHP-3 and Ek-ibastuz CHP, continues the replacement of turbine No 5 and reconstruction of boiler No 12 at the Petropavlovsk CHP-2
Other financial assets are represented by depos-its with flexible conditions of partial replenishment and withdrawal of 14,468 KZT mln Deposits represent funds accumulated by the Corporation for servicing of loans, financing the investment program and maintaining the working capital
Financial and economic indicators by segment for 2015, KZT mln
Indicators Production of electric and heat energy
Transmission and distribu-tion of elec-tric power
Transmission and distribu-tion of heat energy
Sales of elec-tric and heat energy
Other Total
Revenues from sales 47,833 18,664 5,423 35,768 244 107,933
Costs (28,419) (15,041) (6,007) (34,465) (213) (84,144)
Gross profit 19,414 3,623 (584) 1,303 31 23,789
Period expenses (1,877) (1,972) (1,579) (3,556) (688) (9,672)
Profit from operating activities 17,537 1,652 (2,163) (2,252) (656) 14,117
Financial expenses, net (2,253) (94) (63) (3) (53) (2,856)
Losses from exchange rate difference (11,253) (4,564) (1,357) (479) (2,379) (20,031)
Other income 45 197 (96) 292 (9) 429
Income tax expenses (9) 499 376 535 207 73
Income/(Loss) for the year 3,186 (2,310) (3,292) (2,308) (2,891) (7,614)
EBITDA operating by segments 23,620 4,045 (1,358) (2,167) (602) 23,538
COST OF GOODS/SERVICES SOLD
Cost of electrical and heat energy sold in 2015 amounted to 84,144 KZT mln, increase of 1,569 KZT mln or 1 9% compared to 2014 driven by the increased operating costs for such items as “Fuel”, “Depreciation and amortisation”, “Remuneration” and others, compen-sated by the increase of in-house electric power supply
Dominating relative share (42%) in the cost structure of the Corporation is taken by the costs of purchased en-ergy, taking into account services related to its further sale to consumers In 2015 these costs decreased by 4,523 KZT mln or 11% due to the increase of in-house electric power supply for the purpose of replacement of purchased energy from sales companies in Astana city and Akmola region
The growth of electric power production for 440 KZT mln or 9 3% reflected on increased consumption of natural coal for 159 thous tons or 3%, appreciation on “Fuel” item amounted to 1,047 KZT mln or 8% Depreci-ation increased by 2,833 KZT mln due to the revaluation of assets for 31 12 2014 and fixed assets input in 2015 for 35,797 KZT mln
TOTAL EBITDA DYNAMICS
The EBITDA figures for 2015, excluding the losses on exchange rate difference, amounted to 24,885 KZT mln, the growth at 850 KZT mln or 3 5% when compared to 2014 The main factors of operating efficiency indicator growth are the ceiling tariffs on electric power genera-tion with growth of 9% and 16% (Pavlodar, Petropavlov-sk respectively) and increase in sales of electric power of own production with the purpose of further replacement of the purchased energy volume from external sources
In 2015, the operating EBITDA of the Corporation amounted to 23,538 KZT mln, increase of 1,169 KZT mln or 5% compared to 2014 In the structure of EBITDA
operating indicator the leading (paramount) marginal segment is the production of electric and heat energy (23,620 KZT mln), where in 2015 was an increase of 4,281 KZT mln or 22% due to growth for 440 mln kWh or 9% of additionally produced electric power, opera-tional efficiency of commissioned capacities, as well as increase of ceiling tariffs for generated electric power
THE DYNAMICS OF NET INCOME/LOSS
Profit from operating activities for 2015 amounted to 14,117 KZT mln (13 1% margin to sales income), reduc-tion of profit at 1,670 KZT mln due to the cost increase for 1,569 KZT mln or 1 9%
Net financial expenses increased by 850 KZT mln or 30% due to the placement of corporate bonds of SEVKAZ-ENERGO JSC and CAEPCO JSC, as well as the payment of compensations for monetary loans In connection with the transition to a new monetary policy, based on inflation tar-geting conditions, and the establishment of free floating exchange rate of tenge since August 20, 2015 the Corpo-ration suffered losses from the exchange rate difference on monetary loans in the amount of 20,031 KZT mln, thus the financial result of 2015 amounted to minus 7,614 KZT mln The cancelling effect of the devaluation of the national cur-rency is the recognition of the tax asset by virtue of losses on exchange rate difference, as a result the corporate income tax taking into account deferred during the reporting year amounted to savings of 727 KZT mln, which is 4,330 KZT mln lower than in 2014
EBITDA by segments for 2015, KZT mln
10000
15000
20000
25000
5000
-5000
0
23,620
4,045
-1,358
-2,167-602
23,538
Pro
du
ctio
n
Hea
t tr
ansm
issi
on
Sale
s
Oth
ers
Op
erat
ion
al
EBIT
DA
of 2
015
Elec
tric
ity
tran
smis
sio
n
183
254 279
32
151217 238
3741
Current assets
Long-term assets
201520142013
Assets, KZT bln
Total EBITDA for a year, KZT mln
21,733
24,03424,885*
201520142013
* Total EBITDA provided excluding the losses from exchange rate difference
183
254 279
56
104 140 130
79 109 23
3540
Current liabilities
Equity
Long-term liabilities
201520142013
Liabilities, KZT bln
40 41
PERFORMANCE AND DEVELOPMENT PROSPECTS OVERVIEW
2015ANNUAL REPORT
Cash flows, KZT mln
The most significant cash flow from 2015 investment activity was associated with the forced investment pro-gram
In the 2015, the Corporation received funding through bonds placement to the total sum of 6,665 KZT mln
Cash and deposits at the end of the year amounted to 16,556 KZT mln, sufficient reserve funds allow the Cor-poration to maintain the necessary level of liquidity and internal resources to service debt
Authorized capital of the Corporation is 50 mln ordi-nary shares As of December 31, 2015, the fully paid or-dinary shares amounted to 46,043 KZT mln In Novem-ber 2015 CAPEC JSC sold 7 25% of shares belonging to KIF ENERGY S A’R L , CKIF ENERGY S A’R L and Baiterek Venture Fund JSC
The corporation implemented a placement of bonds of CAEPCO JSC in the amount of 3,939 KZT mln maturing June 6, 2025 and bonds of SEVKAZENERGO JSC in the amount of 2,776 KZT mln maturing January 10, 2020 These funds are assigned to finance the investment pro-grammes and develpment projects in line with the strat-egy of the Corporation
Long-term loans are mostly include loans from the EBRD and other international financial institutions, which are intended to finance long-term investment pro-gramme for the reconstruction and modernisation of the assets of the Group
The impact of the economic transition of Kazakhstan at freely floating tenge exchange rate since August 20, 2015 affected the increase in financial liabilities in the amount of 22,197 KZT mln Corporate management be-lieves that the effectiveness of the investment program, coupled with low interest rates on the loan agreements in the currency and maturity of loans over 10 years, will allow to smooth depreciation of tenge in the future and ensure the payoff of the objects
Total financial debt at the end of the reporting year amounted to 90,811 KZT mln, with the Corporation maintaining financial stability and liquidity The Corpora-tion has received from major financial institutions EBRD, ADB waivers of the requirement of early performance of obligations on borrowings in connection with a minor breach of financial covenant as of 31 12 2015
CASH FLOW
In 2015, the increase in cash flow from operating ac-tivities continued due to increased sales volumes and the planned increases in electric power tariffs Net proceeds from operating activities, taking into account the impact of exchange rate changes on cash balances in foreign currencies, comprised 17,380 KZT mln The change in working capital is due to increased stocks and trade re-ceivables Increase in accounts payable, principally relat-ing to the major supply on the activities of the investment program, led to an increase in working capital
-5,000
0
5,000
10,000
15,000
20,000
-20,000
-25,000
-10,000
-15,000
Cash assets as of 31.12.14
2,806
17,380
Net cash assets from investment activities
-22,904
-2,982
1,314
Dividends
Net cash assets from operating activities
Payment of bonds
6,665
Net cash assets from financial activities
2,279
Cash assets as of 31.12.2015
MAIN GOALS AND OBJECTIVES FOR 2016
As part of the investment program, there are a number large-scaled equipment modernization projects planned for 2016 and aimed at increasing the output, reduction of loss-es of electricity and heat during transmission and improving environmental performance
In 2016, the Corporation plans to increase power gen-eration by 10 7% compared to 2015 to 7,228 mln kWh, as well as increase heat generation by 2 2% compared to 2015 to 6 408 mln Gcal, which is due to a planned increase in supplying heat in the form of hot water to customers of PAVLODARENERGO
In 2016, installed electricity generation capacity is ex-pected to grow by 7 7% to 1,203 MW, while installed heat generation capacity should decline by 0 16% to 2,953 Gcal/h due to the launch of turbo generator No 5 and remarking of turbo generator No 7 at Petropavlovsk CHP-2
In 2016, the Corporation plans to spend 24 KZT bln on investment projects
PAVLODARENERGO’s CHP-3 will begin reconstruction of turbo generator No 6 with installed capacity increased to 125 MW up from 110 MW In 2017, the project should be completed and the turbo generator should enter service The ash dump construction at Ekibastuz CHP will also con-tinue
SEVKAZENERGO’s Petropavlovsk CHP-2 plans to begin modernization of turbo generator No 5 in order to increase power output to 95 MW up from 33 MW Furthermore, boiler unit No 12 will enter service in 2016, increasing the rated steam generation capacity to 270 tons per hour up
from 22 tons per hour, which will improve the plant’s reli-ability and efficiency and reduce steam deficits
A total of 27 9 km of heat networks using pre-insulated pipes should be built in 2016, including 1 8 km in Pavlodar, 18 km in Ekibastuz and 8 1 km in Petropavlovsk, plus, PPU foam insulation will be added to heat pipes with length to-taling 5 3 km, including 4 2 km in Pavlodar and 1 1 km in Petropavlovsk
In 2016, as part of investment programs, a total of 127 6 km of 0 4–10 kV power lines should be built, renovat-ed or upgraded, including 61 km of power lines belonging to North-Kazakhstan REDC, of which 36 km are self-sup-porting isolated wires, and 66 6 km belong to Akmola EDC; construction and reconstruction of overhead 35–110 kV power lines stretching 89 6 km, including 19 2 km of Pav-lodar REDC, 70 4 km of Akmola EDC; reconstruction of 17 substations with voltage of 10-220 kV, including three sub-stations of Pavlodar REDC, two substations of North-Ka-zakhstan REDC and twelve substations of Akmola EDC
CAEPCO JSC is Kazakhstan’s third biggest investor in upgrading and renovation of production facilities The Corporation plans to invest a total of 192 KZT bln by the end of the 2009–2020 period
The investment program will focus on three areas: y Increased output; y Energy efficiency, including reduction of electricity and heat losses during transmission;
y Better environmental performance
By 2020, thanks to the program equipment wear at generation facilities will drop from 80% to 56%, with fully renovated production assets making up 65% of all equipment, a 30% increase in installed capacity and a 31% reduction in the amount of harmful emissions The Corporation will completely eliminate excessive losses
PROSPECTS OF THE 2020 INVESTMENT PROGRAM
43
2015ANNUAL REPORT
42
CORPORATE GOVERNANCE
SHAREHOLDER STRUCTURE
As of December 31, 2015, the share capital of CAEP-CO JSC was 46,043,272 KZT thous
During the reporting period, a number of chang-es occurred in the equity structure of the Corporation
Three institutional investors became shareholders: they are private equity funds established by Baiterek national management holding
Equity structure as of December 31, 2015
Central-Asian power-energy company JSC 57 37%
European Bank for Reconstruction and Development (EBRD) (London, United Kingdom)
24 16%
Kaz Holdings Cooperatief U A (Amsterdam, Netherlands) 11 22%
KIF ENERGY S A R L 4 35%
Baiterek Venture Fund JSC 1 45%
CKIF ENERGY S A R L 1 45%
includes 3 independent directors Independent directors has large experience in power industry and make sizable contribution to the management by the joint-stock company, providing assistance in elaborating strategic tasks and supporting necessary mechanics of control
CAEPCO JSC has an effective and transparent corporate governance framework meeting Kazakhstani and international standards The purpose of this framework is to create and sustain trustful relationships with investors and shareholders, making the Corporation more attractive for investors
RESULTS OF THE GENERAL MEETING OF SHAREHOLDERS
The Supreme management body of the Corporation is the General Meeting of Shareholders The sharehold-ers’ primary way to exercise their rights, as reflected in the Charter of the Corporation, is to participate in annual general meetings of shareholders, as well as in extraor-dinary meetings announced by the Board of Directors or the executive body
The shareholders of the Corporation may make sug-gestions to the agenda of the annual General Meeting, nominate candidates to the Board of Directors and Com-mittees, and convene meetings of the Board of Directors
In 2015, there were one annual and three extraor-dinary general meetings of shareholders The General Meeting of Shareholders focused on the following key issues:
y Approval of the financial statements of CAEPCO JSC and its subsidiaries for fiscal year 2014;
y Approval of procedures for the distribution of the Corporation’s net profit for fiscal year 2014;
y Choosing an audit firm to review the financial state-ments of CAEPCO JSC and its subsidiaries based on the 2015 results;
y Election of the members of the Board of Directors of CAEPCO JSC, PAVLODARENERGO JSC, SEVKAZENERGO JSC and Akmola electricity distribution company JSC;
y Adoption of the corporate governance code of SEVKAZENERGO JSC;
y Adoption of the Board of Directors Statute of SEVKAZENER GO JSC;
y Adoption of the new edition of the Board of Directors Statute of CAEPCO JSC
Data processing center of CAEPCO JSC in Pavlodar
THE BOARD OF DIRECTORS OF THE CORPORATION
44 45
CORPORATE GOVERNANCE 2015ANNUAL REPORT
Vice President for Commercial Affairs
Vice President for Operations
Vice President for Economics and Finance
GENERAL MEETING OF SHAREHOLDERS
PRESIDENT
BOARD OF DIRECTORS
Office of CAEPCO JSC in Astana
Operations and Engineering Department
Procurement DepartmentAccounting and Financial Reporting Department
Economics and Project Finance Department
Standardization and Quality Management Department
Project Management Department
Information Technology Department
Secretariat
Facilities Management Department
Vice President for General and Administrative Affairs
Managing Director for Human Resources
Human Resources Department
Legal Department
Public Relations Department
Economic Security Department
Information Security Department
STRATEGIC COMMITTEE
AUDIT COMMITTEE
PERSONNEL, REMUNERATION AND SOCIAL AFFAIRS COMMITTEE
TECHNICAL COMMITTEE
Managing Director for Business Process Re-engineering
INTERNAL AUDIT DEPARTMENT
RISK MANAGEMENT DEPARTMENT
CORPORATE SECRETARY
Managing Director for Procurement
Managing Director for Economics and Finance
Chief Accountant
ORGANIZATIONAL STRUCTURE
46 47
CORPORATE GOVERNANCE 2015ANNUAL REPORT
The Board of Directors of the Corporation determines strategic goals, maintains the necessary operational control mechanisms, including ongoing monitoring and evaluation of business performance To achieve these goals the Board of Directors is guided by the following principles:
y Peer-review decision making with thorough discus-sion of issues using reliable and complete information on the activities of the Corporation in accordance with the highest business standards;
y No restrictions on the legitimate interests and rights of shareholders to participate in the management of the Corporation, receive dividend, reports, and infor-mation about the Corporation;
y Ensuring a balance between the interests of share-holders of the Corporation and maximum objectivity of decisions serving shareholder interests;
y Providing the Corporation’s shareholders with reli-able and timely information
The Board of Directors is composed of independent directors who have no affiliation with the Corporation The Board of Directors is headed by the Chairperson, who convenes meetings of the Board of Directors and presents their agenda based on recommendations from members of the Board of Directors and Board Commit-tees
Remuneration for Board members is determined by the decision of the General Meeting of Shareholders of CAEPCO JSC The total amount of remuneration paid to the Board of Directors in 2015 is 97,785 KZT thous
BOARD OF DIRECTORS
ALEXANDR KLEBANOV (1963) Chairman of the Board of Directors
Chairman of the BoD of CAEPCO JSC, Chairman of the BoD and shareholder of CAPEC JSC30 06 2004 – Member of the BoD of Eximbank Kazakhstan JSC; 20 08 2007 – Chairman of the BoD of CAPEC JSC;16 03 2009 – Chairman of the BoD of CAEPCO JSC
MEMBERS OF THE BOARD OF DIRECTORS
YERKYN AMIRKHANOV (1967) Member of the Board of Directors, President of the Corporation
President of CAEPCO JSC, shareholder and member of the BoD of CAPEC JSC01 07 2001 – Chairman of the BoD of PAVLODARENERGO JSC;30 06 2004 – Member of the BoD of Eximbank Kazakhstan JSC;20 08 2007 – Member of the BoD of CAPEC JSC;16 03 2009 – Member of the BoD of CAEPCO JSC;28 05 2009 – Chairman of the BoD of Caustic JSC;22 04 2011 – President of CAEPCO JSC;25 10 2011 – Chairman of the BoD of SEVKAZENERGO JSC;25 02 2013 – Chairman of the BoD of AEDC JSC;13 11 2013 – Chairman of the BoD of NK REDC JSC;20 01 2014 – Chairman of the BoD of PREDC JSC
DIVIDENDS
The Corporation’s policy regarding distribution, an-nouncement, size, form and timing of dividend payments is set out in the Corporation’s Charter and CAEPCO JSC’s Dividend Policy
The main principles of the Corporation’s Dividend Pol-icy include:
y Balance between the interests of the Corporation and its shareholders in determining dividend payouts;
y Improving investment attractiveness, financial sustainability, capitalization and liquidity of the Corporation;
y Ensuring market returns on invested capital; y Respect for and strict observance of the rights of shareholders and improving their prosperity
The Corporation intends to allocate a certain part of its net income for dividend payouts in the amount that would
allow the Corporation to keep enough funds for its further development The decision on dividend payout is made by the annual General Meeting of Shareholders based on the recommendation of the Board of Directors In case of any unforeseen negative circumstances affecting the Corpora-tion, the Board of Directors should discourage the General Meeting of Shareholders from dividend payout (distribu-tion)
PAYMENT OF DIVIDENDS
In 2015, the annual General Meeting of Shareholders decided to pay dividends to the shareholders of CAEPCO JSC for fiscal year 2014 in the amount of 2,635,598 KZT thous Yield per share in 2014 was 71 3266 KZT As of December 31, 2015, the current book value of one share is 3,465 78 KZT
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CORPORATE GOVERNANCE 2015ANNUAL REPORT
MANFRED-JOSEF KEHR (1947) Member of the Board of Directors, Independent Director
Is not affiliated with CAEPCO JSC and has not been the same for the past three years 2003–2009 Vice President of RWE Power International; 2008–2010 Managing Director, Senior Advisor at RWE Power International; 25 02 2011 Chairman of the BoD at Rhein Ruhr Power; 25 10 2011 – Member of the BoD, Independent Director at CAEPCO JSC
DEVARSHI DAS (1972) Member of the Board of Directors
01 04 2006 – Senior Director at Capital Advisor Partners PTE LTD (CapAsia); 16 07 2012 – Member of the BoD of CAEPCO JSC
PATRIZIO PALMA (1942) Member of the Board of Directors, Independent Director
Is not affiliated with CAEPCO JSC and has not been the same for the past three years 1997–2012 Director, American Appraisal (AAR), Inc , Moscow, Russia;27 10 2014 – Member of the BoD, Independent Director of CAEPCO JSC
FRANZ-JOSEF KAISER (1949) Member of the Board of Directors, Independent Director
Is not affiliated with CAEPCO JSC and has not been the same for the past three years17 11 1975–30 06 2009 Partner at PricewaterhouseCoopers (PWC); 2005–30 06 2009 PWC’s Project Partner for RAO UES of Russia; 10 10 2009 – Member of the BoD, Independent Director at CAEPCO JSC
GRAHAM JOHN WOOD (1951) Member of the Board of Directors
17 08 2009–01 03 2012 Member of the BoD of Freenergy AS, Tallinn; 26 02 2009-01 04 2013 Member of the Supervisory Board, Chairman of the Audit Committee of ENEA SA, Poznan;01 11 2008 – Member of the BoD, Chairman of the Audit Committee of West Herts College;16 07 2012 – Member of the BoD of CAEPCO JSC
GULNARA ARTAMBAYEVA (1969) Member of the Board of Directors
President of CAPEC JSC, shareholder and member of the BoD of CAPEC JSC16 06 2000 – President of CAPEC JSC; 27 06 2002 – Member of the BoD of CAPEC JSC; 27 06 2002 – Member of the BoD of PAVLODARENERGO JSC; 07 10 2002 – Member of the BoD of PREDC JSC; 31 03 2004 – Member of the BoD of Eximbank Kazakhstan JSC; 27 04 2007 – Chairman of the BoD of CAPEC Invest SICAV; 16 03 2009 – Member of the BoD of CAEPCO JSC; 07 07 2011 – Chairman of the BoD of Astana Finance Investment House;22 02 2013 – Member of the BoD of SEVKAZENERGO JSC;14 11 2014 – Member of the BoD of AEDC JSC
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CORPORATE GOVERNANCE 2015ANNUAL REPORT
As of December 31, 2015, the Board of Directors of CAEPCO JSC has four committees:
y Audit Committee (founded on February 25, 2010); y Technical Committee (founded on March 6, 2012); y Strategic Committee (founded on November 28, 2012);
y Personnel, Remuneration and Social Affairs Commit-tee (founded on March 13, 2013)
The Audit Committee is a permanent working body of the Board of Directors It assists the Board of Directors in performing its regulatory and supervisory functions, improvement and strengthening of the internal audit and risk management systems The Committee advises the Board of Directors on matters requiring action on its part
The Technical Committee is a permanent working body of the Board of Directors, ensuring effective par-ticipation of its members in the implementation of timely and effective monitoring of the Corporation’s investment projects
The Strategic Committee is a permanent working body of the Board of Directors created to improve corpo-rate governance, implement projects and monitor imple-mentation of the Corporation’s strategy The Committee also assists the Board of Directors in improving the Cor-poration’s planning and operational development mech-anisms
The Personnel, Remuneration and Social Affairs Committee was created to develop and implement a uni-form human resources policy for the Corporation and its subsidiaries, elect or appoint candidates for the positions of the head and members of the executive body of the Corporation and its subsidiaries, directors of the Internal Audit Department and Risk Management Department, Corporate Secretary and other bodies and subsidiary units, and also to develop an effective corporate gover-nance system and to enforce its principles
THE BOARD OF DIRECTORS PERFORMANCE OVERVIEW
In 2015, the Board of Directors held 8 meetings The Board of Directors focused on the following key issues:
y Review of monthly and quarterly management re-ports;
y Approval of risk appetites of CAEPCO JSC and its sub-sidiaries for 2015;
y Review of periodic reports from the Risk Manage-ment and Internal Audit departments;
y Preliminary approval of consolidated annual audited financial statements of CAEPCO JSC for fiscal year 2014;
y Distribution of net income of CAEPCO JSC in fiscal year 2014 and payout calculation per one common share of CAEPCO JSC;
y Preliminary selection of an audit company for audit-ing consolidated financial statements of CAEPCO JSC for 2015;
y Amendments and additions to the prospect for the first bond issue as part of the first bond program of CAEPCO JSC;
y Approval of the terms of the second bond issue as part of the first bond program of CAEPCO JSC;
y Conclusion of contracts with independent directors – members of the Board of Directors of CAEPCO JSC;
y Conclusion of the shareholder agreement between CAPEC JSC, CAEPCO JSC, CKIF ENERGY S A R L and KIF ENERGY S A R L ;
y Conclusion of the project agreement between CAPEC JSC, CAEPCO JSC and Baiterek Venture Fund JSC;
y Election of the Chairman of the Board of Directors; y Election of the members of the Audit Committee un-der the Board of Directors;
y Election of the members of the Strategic Committee under the Board of Directors;
y Election of the members of the Technical Committee under the Board of Directors;
y Election of the members of the Personnel, Remuner-ation and Social Affairs Committee under the Board of Directors;
y Election of observers under the Board of Directors; y Election of the Corporate Secretary; y Approval of the consolidated business plan of CAEP-CO JSC for 2016;
y Approval of the heat network modernization project for Pavlodar heat networks LLP and Petropavlovsk heat networks LLP;
y Adoption of the 2016–2020 Strategy for CAEPCO JSC;
y Approval of the schedule of meetings of the Board of Directors and its Committees in 2016
COMMITTEES OF THE BOARD OF DIRECTORS AND THEIR FUNCTIONS
Audit CommitteeTechnical
CommitteeStrategic
CommitteePersonnel, Remuneration and
Social Affairs Committee
Franz-Josef Kaiser, Committee Chairman, Independent Director
Manfred-Josef Kehr, Committee Chairman, Independent Director
Patrizio Palma, Committee Chairman, Independent Director
Gulnara Artambayeva, Committee member
Yerkyn Amirkhanov, Committee member
Yerkyn Amirkhanov, Committee member
Graham Wood, Committee member
Graham Wood, Committee member
Gulnara Artambayeva, Committee member
Devarshi Das, Committee member
Devarshi Das, Committee member
Franz-Josef Kaiser, Committee member
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CORPORATE GOVERNANCE 2015ANNUAL REPORT
To improve business processes and the effectiveness of decision making, the Corporation has introduced in-ternal controls procedures which CAEPCO JSC sees as as systematic, integrated into strategic and operational management at all levels and covering all units then they perform their functions
The Corporation’s Internal Audit Department reports directly to the Board of Directors of the Corporation and is supervised by the Audit Committee which monitors decisions and processes to ensure the reliability of finan-cial reporting and coordinate internal controls and risk management procedures
The Internal Audit Department operates in accor-dance with an annual action plan approved by the Board of Directors It presents annual reports, as well as the Department’s quarterly progress reports is the Board of Directors and the Audit Committee
The Department operates in accordance with the International Standards on Auditing (ISA) developed by the Institute of Internal Auditors, as well as in accordance with the current laws and regulations of the Republic of Kazakhstan and the Code of Ethics of internal auditors of CAEPCO JSC
Internal auditors adhere to such principles as integ-rity, objectivity, confidentiality and professional compe-tence
The offices of internal audit in the Corporation’s sub-sidiaries operate in accordance with the requirements set by the Internal Audit department and audit methodology and practices adopted in the Corporation In 2015, the Internal Audit department had a team of 10 auditors: four working in CAEPCO JSC and six in subsidiaries
INTERNAL CONTROLS AND AUDIT
The Corporation’s corporate governance practices in 2015 were fully consistent with the provisions of the Cor-porate Governance Code
CAEPCO’s corporate governance system regulates in-teraction between the management bodies, the Corpo-ration’s internal controls, shareholders and other stake-holders, ensuring a balance between the interests of all the above parties
Corporate governance is regulated by the Corpora-tion’s internal by-laws and is summarized in CAEPCO’s Corporate Governance Code adopted in 2010 by the Board of Directors
The Code fully complies with laws and regulations of the Republic of Kazakhstan “On joint-stock companies”: the document is based on the current international prac-tices in the field of corporate governance and recommen-dations on the use of corporate governance principles by Kazakhstani joint-stock companies
CORPORATE GOVERNANCE CODE COMPLIANCE REPORT
The principles of the Corporate Governance Code are aimed at shaping and implementing into the Corpora-tion’s day-to-day operations of the norms and traditions of corporate behavior that are consistent with interna-tional standards and contribute to creating a positive image of the Corporation in the eyes of its shareholders, customers and employees with a view to exercising the rights of shareholders to the maximum extent possible and improving their awareness about the Corporation’s activities, and also to control and reduce the risks, main-tain sustainable improvement of the Corporation’s finan-cial performance and successful pursuit of its statutory goals
In 2015, the main principles of the Corporate Gover-nance Code were followed
In 2015, the Internal Audit department carried out routine audits in CAEPCO JSC Group in the following ar-eas:
y Evaluation of the effectiveness of the internal control procedures for business processes:– Inventory accounting;– Accounting of fixed assets and intangible assets;– Repairs management;– Occupational health and safety;– Human resources management;– Managing the process of issuing specifications
y Selective inventory audits; y Evaluation of the effectiveness of CAEPCO’s corpo-rate risk management system;
y Monitoring of corrective measures to follow up on the recommendations of the Internal Audit depart-ment and Deloitte LLP audit firm;
y Analysis of draft internal regulations, providing rec-ommendations, recruitment
In 2015, key documents regulating the activities of the Internal Audit department were updated: The Statute of the Internal Audit Department, Internal Audit Policies and Procedures of CAEPCO JSC, job descriptions for au-ditors
The President is the sole executive body of the Cor-poration, who is responsible for managing its day-to-day operations and implementing a strategy determined by the Board of Directors and shareholders The President is guided by the principles of action in the best interests of shareholders, integrity, diligence, reasonableness and vigilance
Remuneration for the executive body is determined by the decision of the Board of Directors of CAEPCO JSC
The President’s remuneration shall be determined based on the following requirements:
y Remuneration must consist of fixed and variable parts;
y The variable part of remuneration depends on the President’s key performance indicators, his or her qualifications and personal contribution to the Cor-poration’s results for a certain period, with a view to motivating the President to show first-class perfor-mance;
y Social benefits, guarantees and compensation pay-ments to the President shall be made in accordance with laws and regulations, the Corporation’s internal policies and the employment contract
EXECUTIVE BODY
YERKYN AMIRKHANOV THE PRESIDENT OF CAEPCO
BRIEF BIOGRAPHY
Started his career at the Institute of Steel and Alloys (Moscow) As of 1997, held senior positions in Kazkom-mertsbank, Pavlodar oil refinery, Air Kazakhstan and Ex-imbank Kazakhstan President of CAEPCO JSC as of April 2011
Mr Amirkhanov is a shareholder of Central-Asian power-energy company comprising a number of com-panies in the energy, financial and other sectors of the economy He is currently responsible for strategic man-agement of enterprises within the holding
Yerkyn Amirkhanov was awarded with Kurmet state decoration and commemorative medals to mark the 10th anniversary of the city of Astana and the 20th anniversary of independence of the Republic of Kazakhstan
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CORPORATE GOVERNANCE 2015ANNUAL REPORT
KEY PRINCIPLES OF THE CORPORATE GOVERNANCE CODE
Principle overview Comment
JUSTICE
Equal treatment of all shareholders, regardless of their equity share and whereabouts, and providing opportu-nities for the effective protection of their rights
Corporate governance in CAEPCO JSC is based on the principle of protection of and respect for the rights and legitimate interests of the Corporation’s shareholders, promoting the growth of assets and securing the Cor-poration’s financial stability and profitability The share-holder rights are enshrined in the Charter and the Statute of the General Meeting of Shareholders of CAEPCO JSC, and comply with the Joint-Stock Companies Act of the Republic of Kazakhstan
ACCOUNTABILITY
The Board of Directors of the Corporation reports to its shareholders, executive bodies report to the Board of Direc-tors, while employees report to the management (President of the Corporation) This principle ensures accountability and determines the lines of authority between the Corpo-ration’s management bodies, as well as full accountability of the Corporation to its shareholders, which is achieved through the timely provision to the shareholders of accurate and complete information about the current financial situa-tion of the Corporation
This principle of the Corporate Governance Code is fol-lowed through the introduction of the Corporation’s orga-nizational structure in accordance with the Charter and the Joint-Stock Companies Act of the Republic of Kazakhstan The principle of accountability is manifested in every reso-lution of the management body/structural unit, which al-lows to determine the lines of authority between the man-agement bodies of the Corporation
RESPONSIBILITY
Responsibility of the Corporation to its shareholders, em-ployees, customers and partners, close cooperation with them in order to grow the assets of the Corporation, im-prove its stability and reliability This principle determines the ethical standards for the Corporation’s shareholders and employees, as well as outlines the liability of the Cor-poration’s officers for their illegal and wrongful actions or inaction, as provided by the current legislation
Conduct comprising business relationship standards in four areas:
y Business and professional ethics y Organizational ethics y Corporate governance y Corporate social responsibility
The Code of Business Conduct is a set of guidelines and principles followed by the Corporation employees when using the principles of business ethics in their work CAEPCO JSC has developed and adopted an action plan for interaction with stakeholders, based on which the Cor-poration prepares an annual progress report
Principle overview Comment
TRANSPARENCY
Timely disclosure of accurate information about all ma-terial facts relating to the Corporation’s activities, includ-ing its financial situation, performance, ownership and management structure, in the amounts prescribed by the legislation and internal policies, as well as ensuring the free access of all interested parties to such information by publishing it so as to make it easily accessible to the pub-lic, as provided by the legislation and the Corporation’s internal policies
The mechanism of how the principle of transparency should be implemented is best explained in the Informa-tion Policy of CAEPCO JSC
ENVIRONMENTAL PROTECTION AND SOCIAL RESPONSIBILITY
The Corporation treats the environment responsibly and rationally, operating as a socially responsible business
CAEPCO JSC has developed and adopted an action plan on environmental and social initiatives, guiding the Corpo-ration’s policy in the field of environmental protection and the social responsibility Starting from 2015, the Corporation has been publishing corporate social responsibility reports
EFFECTIVENESS
The Corporation’s President and its Board of Directors must ensure that the Corporation is managed in a sensi-ble and responsible manner, promoting steady improve-ment of its financial performance, growth of sharehold-er wealth, effective human resources policy, employee training and development, motivation and social security
The principle of effectiveness is guided by the Statute of the President and the Statute of the Board of Directors of the Corporation The President is the sole executive body, responsible for managing day-to-day operations and im-plementing the strategy determined by the Board of Di-rectors and Shareholders The goals of the Board of Direc-tors are to ensure the availability of a well-thought-out and long-term strategy, grow the Corporation’s assets, ensure operational efficiency, enforce the rights and legitimate in-terests of the shareholders and control the executive body
CONTROLLABILITY
Control over financial and business activities of the Corpo-ration to protect the rights and legitimate interests of its shareholders, supervision of senior managers over junior managers in accordance with the policies and procedures approved by the Board of Directors of the Corporation, as well as the efficient use of internal and external auditors along with the introduction of an effective risk-based in-ternal controls system
Control over financial and business activities of the Corpo-ration is the responsibility of the President of CAEPCO JSC in accordance with the provisions set forth in the internal policies The Corporation has an Audit Committee acting is an advisory body of the Board of Directors of CAEPCO JSC, whose goal is to assist the Board of Directors in monitor-ing the decisions and processes, ensuring the reliability of financial reporting
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2015ANNUAL REPORT
56
Migration of risks during 2014–2015 on CAEPCO JSC’s risk mapping
Risk 2014 2015 Status
EXCESSIVE HEAT LOSSES
NON-PERFORMANCE OF CONTRACTUAL OBLIGATIONS
by contractors/suppliers
CURRENCY RISK
HUMAN RESOURCES RISKS
Based on the results of updating the Corporate Risk Register and Risk Mapping of the Corporation, which occurred in 2015 in accordance with the approved Risk Management Policy, risks associated with excessive heat
losses and non-performance of contractual obligations by contractors/suppliers have moved from critical to sig-nificant At the same time, human resources and curren-cy risks have moved from significant to critical
ANALYSIS OF SIGNIFICANT RISKS AFFECTING THE PERFORMANCE OF CAEPCO JSC
The Corporation has an enterprise risk management (ERM) system aimed at identification, assessment and monitoring of all significant risks, as well as risk minimiza-tion with the internal control standards (ICS) established
To improve its corporate practices, the Corporation is guides by the international standards in the field of risk management and internal controls developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and the International Organization for Standardization (ISO)
The Risk Management department reports to the Board of Directors of the Corporation The department operates based on the annual work plan approved by the Board of Directors
In 2015, the Risk Management department conduct-ed the following major activities:
y Analysis and testing of the ICS efficiency in business processes:
– Maintenance and repairs management,– Managing the process of issuing specifications for connection to heat and power networks,– Management of environmental protection;
y Updating the Corporation’s Risk Register and Risk Mapping;
y Monitoring the activities aimed at improving the ICS framework and risk management practices
RISK MANAGEMENT
IN 2015
to reduce human resources risks, PROFENERGY project was developed by the Corporation aimed at employee development, retention of key personnel and attraction of young specialists
One of the important priority of CAEPCO JSC for the long perspective is minimization of economic, social, envi-ronmental and other risks Timely and comprehensive analysis of risks in the management by the Corporation allows to adopt optimal decisions in terms of expenses and losses as well as to increase efficiency and sustain-ability of subsidiary organizations operations
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RISK MANAGEMENT 2015ANNUAL REPORT
OPERATIONAL RISKS
In 2015, in accordance with the classification and lev-el of criticality based on Risk Register and Risk Mapping, the Corporation’s operational risk management focused on the following areas:
y Issuing specifications for connection to heat and power networks (risk – delayed issue/non-issue of specifications);
y Maintenance and repairs (risk – failure to meet the deadlines of the repair campaign);
y Human resources management (risk – loss and short-age of qualified/key personnel)
In order to control the risks related to issuing specifica-tions for connection to heat and power networks, as well as to reduce the risk of fraud and ensure the timely issue of specifications in accordance with the internal controls system, the business process called “Management of the process of issuing specifications for connection to heat and power networks” has been analyzed As a result, a decision was made to create a Customer Service Center in PAVLODARENERGO JSC Automating the processing of paperwork for the issue of specifications by the entities of the Corporation is currently under consideration, also the websites of affiliated organizations are being filled
FINANCIAL RISKS
Liquidity risk The Company is exposed to liquidity risk, including inability to meet its financial obligations as they fall due The Company manages liquidity risk by maintaining appropriate levels of reserves, bank loans, confirmed lines of credit and working capital funds through constant monitoring of the Corporation’s net debt, taking into account the projected financial situa-tion, forecasted and actual cash flow and future CAPEX commitments
Risk of higher prices for equipment, raw materi-als and supplies The Corporation is exposed to the risk of higher coal prices, since the equipment at CHP plants was designed for a particular type of coal purchased from the same source However, the Corporation’s capability to monitor this risk and the extent of its impact on the operating profit are protected by the government’s coal price regulation, with price hikes compensated by means of emergency regulatory measures
Market risks The Corporation is exposed to curren-cy and interest rate risks The Corporation has substan-tial obligations denominated in USD To manage the risk associated with changes in the USD’s exchange rate, the Corporation monitors any changes in the exchange rate In 2015, CAEPCO JSC did not resort to hedging its cur-rency risks because of the lack of financial derivatives on the Kazakhstani market In this regard, the Corporation uses natural hedging by placing idle funds on deposits denominated in USD, as well as monitoring the effective-ness of long-term investment programs
The Corporation is sensitive to interest rate volatility, as it has floating-rate debt
The interest rate on the EBRD loans is based on Kaz-Prime and LIBOR interbank rates The fact that its liabil-ities are long term allows the Corporation to hedge this risk group naturally, as loans were made as an invest-ment
Credit risk Arising as a result of the counterparties’ failure to perform their contractual obligations, credit risk is equal to a counterparty’s liabilities minus the Corpora-tion’s liabilities to this counterparty
CAEPCO JSC has a highly diverse customer base rep-resented by various segments of the economy, which helps to mitigate credit risks
LEGAL RISKS
Violation of environmental regulations is a significant risk that is identified by the Corporation management as one of the legal risks In order to control environmental risks and to reduce harmful emissions, CAEPCO JSC has reviewed the effectiveness of control procedures at its facilities to ensure compliance with ISO 14001 interna-tional environmental management standard adopted in the subsidiaries of the Corporation Based on the ICS analysis, recommendations have been given to all fa-cilities of the Corporation on how to develop a uniform environmental policy aimed at reducing environmental risks, setting medium- and long-term goals in the field of environmental protection and preparing programs for their achievement
with information on the workload of the power supply areas, also opportunities for filing applications online and load calculation by customers are currently under review
To control the risks associated with contractors in-volved in renovation projects, the Corporation’s con-tractual activities have been analyzed, including internal controls procedures for maintenance and repairs man-agement Based on the results obtained, the internal pol-icies and procedures for working with contractors were reviewed, contract templates were developed, providing stronger control and accountability for timely and proper performance of works related to construction, modern-ization and repair of equipment
To reduce human resources risks, PROFENERGY proj-ect was developed by the Corporation in 2015 aimed at employee development, retention of key personnel and attraction of young specialists
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2015ANNUAL REPORT
60
MATERIAL ASPECTS AND BOUNDARIES
In accordance with the Principles for Defining Report Content of the GRI G4 Guidelines the materiality of the topics disclosed in the Report was assessed The pro-cedure of materiality assessment includes the following main stages:
Phase 1 Identification of a maximally wide range of potentially important topics related to sustainable devel-opment based on the GRI G4 Guidelines
Phase 2 Analysis of the degree of impact of the in-dicated topics within the Corporation and outside of it Topics for further disclosure were selected taking into consideration stakeholders engagement Priority of top-ics from the point of view of their impact on the activity of the Corporation and its development strategy was also analyzed
SINCE 2009
within the frames of the investment program in accordance with EBRD policy, the Corporation pre-pares the Environmental and Social Action Plan (ESAP) Activities of the ESAP aimed to enhance-ment of environmental parameters of production and safety policy and labor protection at CAEPCO JSC enterprises
CAEPCO JSC realizing its social responsibility among consumers, state, investors and society adheres to sustainable development conception Based on high consequence of its operations CAEPCO JSC implements complex of activities aimed at expansion and increase of efficiency of interaction with all stakeholders
The strategic goal of CAEPCO JSC is to build a leading private energy company strictly complying with the es-tablished principles of sustainable development such as provision of high-quality services to customers, compliance with the international industrial and environmental standards, improvement of corporate governance, carrying out an anti-corruption activity
Phase 3 In accordance with the opinion of stake-holders and the strategic plans of the Corporation, key topics were ranked in order to place priorities on the cre-ated Materiality Map Average score was attributed to each Aspect of activity depending on its impact on the Corporation (horizontal axis) and its stakeholders (verti-cal axis) The highest priority was set for the Aspects lo-cated in the red zone – during preparation of the report priority attention was given to them Also the Aspects of the orange zone were partially disclosed
Phase 4 As a follow-up to the report’s issue, feed-back will be requested in order to improve relevance of the Materiality Map in future reports of the Corporation
SUSTAINABLE DEVELOPMENT
Imp
ort
ance
for
stak
eho
lder
s
Importance for the Corporation
1 2 3 4 5 6 7 8 9 100
1
2
3
4
5
6
7
8
9
10
41
42
31
273
6
13
16
288
26
45
5
30
229
23
33
15
7
37
32 4
1
40
22
25
24
34
44
36
38
43
18
19
9
11
10 21
14
12
20
3517
39
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SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
LIST OF ASPECTS
No Aspects
1 Economic Performance
2 Market Presence
3 Indirect Economic Impacts
4 Procurement Practices
5 Materials
6 Energy
7 Water
8 Biodiversity
9 Emissions
10 Effluents and Wastes
11 Products and Services
12 Compliance
13 Transport
14 Overall
15 Supplier Environmental Assessment
16 Environmental Grievance Mechanisms
17 Employment
18 Labor/Management Relations
19 Occupational Health and Safety
20 Training and Education
21 Diversity and Equal Opportunity
22 Equal Remuneration for Women and Men
23 Supplier Assessment for Labor Practices
No Aspects
24 Labor Practices Grievance Mechanisms
25 Investment
26 Non-discrimination
27 Freedom of Association and Collective Bargaining
28 Child Labor
29 Forced or Compulsory Labor
30 Security Practices
31 Indigenous Rights
32 Assessment
33 Supplier Human Rights Assessment
34 Human Rights Grievance Mechanisms
35 Local Communities
36 Anti-corruption
37 Public Policy
38 Anti-competitive Behavior
39 Compliance
40 Supplier Assessment for Impacts on Society
41 Customer Health and Safety
42 Product and Service Labeling
43 Marketing Communications
44 Customer Privacy
45 Compliance
STAKEHOLDER ENGAGEMENT
An important item of the sustainable development system is stakeholder engagement Principles of stake-holders’ identification and selection are governed by a regional aspect The parties that can be affected by ac-tivity of the Corporation are identified based on their ter-ritorial belonging to the regions where the Corporation operates During preparation of the Report management of CAEPCO JSC was snap polled and based on results of
the poll a Corporation stakeholders ranking map was prepared and analyzed Primarily cooperation is estab-lished with those stakeholders that significantly affect activity of the Corporation and those that can signifi-cantly affect it in medium term if the Corporation imple-ments its strategic initiatives In addition to the impact of the Corporation’s activity on stakeholders was taken into consideration G4-SO1
Key Stakeholders Engagement Process Issues Raised
Employees Ensured via corporate newsletters and websites There are special e-mail boxes and phone hotline for the employees Corporation management holds meetings with employees Labor disputes are resolved by the Conciliation Commissions with participation of representatives of both the employer and the employee
y Occupational health and safety; y Corporation’s activities communication; y Support in professional development
Local Communities The Corporation has systemized its communications with the customers; feedback is arranged via websites and e-mail Public hearings, round tables and other events are held
y Processing and approval of applications for the tariffs of monopolistically regulated services;
y Implementation of the investment program;
y Quality of rendered services, monitoring of compliance with customers’ requirements
Governmental and Regulatory Authorities
Requests from governmental and regulatory authorities are processed: some requests are answered, while others are limited to fact-finding Employees of the Corporation participate in specialized meetings and consultations Visits of official delegations are arranged
y Mitigation of the negative impact of industrial facilities operations on the city and the region;
y Ensuring preparation for a heating season; y Performance of investment commitments; y Compliance with the law, including
environmental and nature-protection requirements
Suppliers, Contractors, and Customers
Tender processes, meetings with contractors and customers are held Corporate web-site provides special feedback section
y Creation of a mutually beneficial partnership;
y Ensuring transparency of tender process
Educational Institutions Meetings with representatives of the higher education institutions of the regions are held in the Company’s presence regions Employees of the Group Companies participate in admission boards, qualification commissions and accreditation of educational programs
y Staff recruitment for the companies; y Internship and jobs for graduates
Mass Media The Corporation on annual basis arrange press tours, media briefings, press conferences, circulate press-releases and provide explanations on the informational requests
y Establishing mutual cooperation; y Communication on implementation of the
investment program for modernization and renovation of assets;
y Compliance with environmental standards; y Implementation of social projects
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SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
Key Stakeholders Engagement Process Issues Raised
Non-governmental organizations (NGO)
NGO’s representatives are regularly invited to participate in the press tours and public hearings held throughout the year Employees of the Corporation participate in the public hearings with representatives of small and medium business Meetings are held with leaders of NGOs that support socially vulnerable people, with participation of representatives from consumer right protection associations
y Assistance in addressing environmental and social issues
Trade Union Interaction with trade unions is maintained by arranging meetings and handling the requests received in the course of activities
y Compliance with the collective labor agreement;
y Assistance in arrangement of leisure time and recreational activities for the employees
ENVIRONMENTAL POLICY
ENVIRONMENTAL IMPACT MANAGEMENT* G4-DMA
Environmental protection, consistent improvement of environmental performance and energy efficiency are key strategic priorities of CAEPCO JSC and an integral part of the sustainable development process In 2015 the Group of Companies generated 6,529 3 mln kWh of electric energy and 6 3 mln Gcal of heat energy For energy generation 6,016 6 thous tons of Ekibastuz coal and 8 8 thous tons of mazut were consumed G4-EN1
In order to minimize environmental impact the CAEPCO JSC Group of сompanies consistently implements the envi-ronmental policy provided for by the Strategy of Corpora-tion’s Development in order to comply with the requirements of the environmental law and use the latest achievements in science and technology
Priority directions in the environmental activity of CAEPCO JSC are based on key impacts of its subsidiar-ies – PAVLODARENERGO JSC and SEVKAZENERGO JSC – on the environment These impacts include:
– emissions of pollutants into the atmosphere;– emissions of greenhouse gas (CO2) into the atmo-
sphere;– impact on water bodies by water consumption and
water discharge;– industrial wastes disposal
Significant environmental aspects are managed through regular monitoring of environmental perfor-mance, assessment of compliance with the legislative and corporate requirements The Environment, health and safety department of CAEPCO JSC is in charge of controlling, accounting and analysis of the above men-tioned environmental impacts of the subsidiaries
Communication on environmental protection related activity is established by publishing of Environmental Pol-icy and Regulations, Sustainable Development, Environ-mental and Social Responsibility Reports on the websites of the Corporation and its subsidiaries
The subsidiaries also communicate to their contrac-tors the applicable legislative and normative require-ments by including such requirements in agreements, specifications and requirements for contractors
The Corporation intends to do its best to prevent a negative environmental impact and implement oper-ating methods complying with the requirements of the ISO 14001 international standard in all spheres of its ac-tivity
Starting from 2009 the Corporation has been imple-menting an Environmental and Social Action Plan (ESAP) as a part of its Investment Program and in accordance with the Environmental Protection Policy of the Europe-an Bank for Reconstruction and Development in regard of the EBRD-financed projects Actions of the Environ-mental and Social Action Plan are aimed at the improve-ment of the environmental attributes of the production process, as well as of the Health and Safety Policy in the companies of CAEPCO JSC Within the frameworks of
the ESAP the Corporation provides a public report on an annual basis Starting from November 2014, as a part of implementation of the program of AEDC’s electrical dis-tribution system modernization and expansion funded by the Asian Development Bank (ADB), the Corporation is implementing an Environmental and Social Management System (ESMS) in accordance with the ADB’s Safety Mis-sion Statement (2009, ADB’s SMS) and other social pol-icies of the Bank, such as the Social Protection Strategy
(2001), the Gender Equality Policy (1998) and the Public Relations Policy (2011) with regular submission to the ADB of the reports on environment and social sphere monitoring in regards of the AEDC’s projects related to modernization and expansion of electrical distribution networks These projects are aimed at enhancement of reliability of the network, reduction of losses and down-time minimization through better infrastructure
ATMOSPHERIC AIR PROTECTION G4-EN27
Replacement of the obsolete generating facilities having low energy and environmental efficiency by the new facilities complying with modern environmental protection requirements has the highest impact on emis-sions reduction by the Corporation To improve its envi-ronmental performance since 2009 to 2014 as part of the investment program the Corporation conducted a
reconstruction of the fly ash collectors (FAC) at all boil-ers of its power plants; combustion gas purification ef-ficiency after installation of emulsifiers achieved 99 5% vs 95 8% This action allowed reducing total annual coal ash emissions from 48 thous tons to 13 2 thous tons per annum (72%)
G4-EN21
MITIGATION OF ENVIRONMENTAL IMPACTS, ENVIRONMENTAL MEASURES
In 2015 the following main actions were implement-ed to mitigate environmental impacts:
– replacement, reconstruction and modernization of main equipment ensuring efficient removal, dispos-al, neutralization, rejection and decontamination of pollutants in the gas from pollutant emission sources, reduction of energy consumption for internal needs, better accounting of fuel consumption, reduction of specific fuel indicators per a unit of generated prod-uct;
– capital and current repairs of dedusting units (repair of worn-out parts of fly ash collectors (FAC) and gas
ducts, maintaining FAC’s performance at the de-signed level of 99 5%, repair and replacement of as-pirators (3 pcs );
– a number of actions for reconstruction of boilers (dis-mantling of obsolete boilers with high concentration of hazardous substances in combustion gas, replace-ment of burners), which resulted in reduction of haz-ardous substances emissions into the atmosphere;
– current repairs for maintaining main equipment oper-ation in compliance with the Technical Regulations of the RK (No 1232 dated 14 12 2007);
* All quantitative environmental data is provided under the “generation” block due to its significant impact on the environment
Gross pollutant emissions in 2009–2015, thous. tons
NOx coal consumption, mln tonsAsh SOx
2015201420132012201120102009
5.41 5.63 5.67 5.82 6.02 5.86 6.02
43
48
14
41
42
15
30
43
15
17
42
16
14
44
17
14
43
18
13
44
15
Specific pollutant emissions in 2009–2015, mg/mWh
NOx power generation, bln kWhAsh SOx
2015201420132012201120102009
12.38 13.01 12.78 13.08 13.3113.76 13.83
3.46
3.88
1.09
3.16
3.27
1.13
2.31
3.39
1.14
1.3
3.21
1.23
1.07
3.28
1.31
0.98
3.13
1.29
0.96
3.17
1.06
66 67
SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
– installation of an automated process control sys-tem (APCS) at boilers of power plant No 2 of PAV-LODARENERGO JSC and turbine unit K-63-90 No 1 of SEVKAZENERGO JSC
GREENHOUSE GAS (СО2) EMISSIONS G4-EN15
After the Kyoto Protocol entered into force for the Republic of Kazakhstan on 17 09 2009, the Corporation arranged work for preparation to carrying out the inven-tory of greenhouse gas emissions and ozone depleting substances consumption
For greenhouse gas monitoring in accordance with the guideline regulatory documents a calculation method is used; it provides for accounting of emissions from nor-mal (regular) production activity, special practices (com-missioning works, process shutdown, repair and main-tenance) and emergencies On March 26, 2011 a loan agreement for a total amount of 40 mln USD between the heat network of CAEPCO JSC and the European Bank of Reconstruction and Development (EBRD) with at-traction of investments from the Clean Technology Fund
(CTF) was signed The project of total amount of 50 USD mln aims at reconstruction and modernization of district heating networks during the period 2011–2015 in Pav-lodar, Ekibastuz and Petropavlovsk in order to improve energy efficiency, reduce losses and improve environ-mental performance (reduction of CO2 emissions due to the savings in the coal consumption what is conditioned by decrease of heat losses during transmission over pipe-lines) Thus, gross CO2 emissions reduction in 2015 vs 2010 was 279 thous tons on an cumulative basis or 4% on specific emissions basis
An additional management tool for greenhouse gas reduction is an energy saving program and the improve-ment of overall fuel efficiency associated with increase in the share of the energy generated by new power gener-ating units, as well as implementation of the ISO 50001 Energy Management Systems standard (energy saving actions) at the companies; these actions aim at both in-crease of energy efficiency of production processes and reduction of greenhouse gas emissions Thanks to im-plementation of actions of this program, reduction of greenhouse gas emission by 86 854 thous tons of CO2
was achieved in 2015 G4-EN19
G4-EN18
ENVIRONMENTAL EXPENDITURES
In order to improve efficiency of environmental ac-tivity the Group of Companies increases financing of en-vironmental actions Total amount of the expenditures in 2015 was 8,100 2 KZT mln that is 18% more than in 2014 (6,874 3 KZT mln) For all new construction and reconstruction projects an Environmental Impact Assessment (EIA) project is prepared; its information is communicated to local communities and stakeholders
through public hearings To confirm compliance with the environmental standards of the Republic of Kazakhstan all projects pass state environmental examination in the territorial environmental regulatory authorities
In 2015, the state authorized bodies found no signif-icant violations of the environmental law and other reg-ulations in the environmental activity of the subsidiaries G4-EN29
WATER MANAGEMENT AND WATER RESOURCES CONSERVATION G4-EN8
Water resources use is an integral part of produc-tion process of the companies and it plays a key role in the process of equipment cooling For energy produc-tion process the Petropavlovsk CHP-2 have to use water from the pond created in 1959–1961 partially within the boundaries of the Bolshoye Beloye lake (8 km away from the city); this lake does not belong to the protected na-ture sites or the sites of national and/or international sig-nificance, and it is not valuable from the point of view of biodiversity In accordance with the design data, surface area of the cooling pond is 10 km2, volume of water at full reservoir level is 20 187 mln m3, the pond is used at 130–131 m level that corresponds to the volume of 15 3 mln m3 Laboratory of SEVKAZENERGO JSC arranged a pro-duction monitoring of hydrochemical parameters of water and the water bodies where water is discharged Composition and pollution rate of discharged waters is controlled by a specialized accredited laboratory on a weekly basis
Companies of the Group have drinking water supply systems, as well as storm and domestic sewerage sys-tems Water for domestic, drinking, fire-fighting needs is supplied and discharged in a centralized manner, via city water supply and sewage networks based on an agree-ment Production water supply system is a closed-circuit water system
In 2015 the Group of Companies consumed 540,137 6 thous m3 of water for water supply, main part of that was water of the closed-circuit water system
During the reporting period water discharge was 469 15 thous m3
Among the most important environmental activities related to water use and water discharge implemented in 2015 we would like to highlight the following:
– modernization of industrial water closed-circuit sys-tems, water recycling, system preventing contam-ination and depletion of water resources (current repair of 3 drainage pumps and maintenance of 2 deep-well pumps were performed);
– monitoring of qualitative and quantitative charac-teristics of water (water was analyzed in accordance with the approved schedule);
– repair of pipelines, stop and control valves for indus-trial, service and drinking water;
– replacement and repair of stop valves of pipelines for technical water, fire-fighting water supply and heat-ing
Biological diversity is the most impacted by water development facilities of power plants – in water intake areas there is a risk of mass mortality of hydrobionts In order to mitigate this risk a number of actions related to equipment of water intake areas with fish protection structures and control of their operation are carried out:
– actions for improvement of qualitative composition of discharges water, improvement of efficiency of effluent treatment facilities (cleaning of the installed Rubezh 45 floating booms) are carried out on an an-nual basis;
CO2 (carbon dioxide)
CO2 gross emissions in 2009–2015, mln tons
coal consumption, mln tons
2015201420132012201120102009
5.41 5.63 5.67 5.82 6.02 5.86 6.02
8.4
8.9 9.0 9.0
9.3
8.8
9.1
2015201420132012201120102009
Specific CO2 emissions per a unit of generated energy in 2009–2015, ton/MWh
0.682 0.687
0.704
0.678
0.714
0.640
0.659
G4-EN31 Environmental expenditures, KZT mln
Ref No
Expense name Expense amount, KZT mln
2013 2014 2015
CAEPCO JSC 7,698 1 6,874 3 8,100 2
PAVLODARENERGO JSC
1 Investment expenditures 3,363 6 2,581 5 2,735 8
2 Expenses for capital repair of fixed assets intended for nature protection purposes
129 6 4 7 788
3 Current expenses 915 6 925 8 1,152
SEVKAZENERGO JSC
1 Investment expenditures 2,999 9 2,911 7 3,000
2 Expenses for capital repair of fixed assets intended for nature protection purposes
259 5 212 9 131 5
3 Current expenses 29 9 237 7 292 9
68 69
SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
– for improvement of biological state of the lake part of discharge channel, bottom cleaning works are
carried out on an annual basis for water temperature reduction and water aeration
EFFICIENT MANAGEMENT AND DISPOSAL OF PRODUCTION WASTES G4-EN23
Ash wastes, which represent 99% of the total amount of wastes, are stored in specially equipped water devel-opment facilities of plane type – ash dumps Compliance with the environmental law of the Republic of Kazakhstan during creation of new reservoirs for ash wastes storing allows to prevent environment contamination by ash pro-duction wastes and ensure stable operation of CHPs Total volume of wastes generation at companies of the Group in 2015 amounted to 2,452 thous tons, including 2,437 thous tons of ash wastes, 14,4 thous tons of industrial and domestic wastes Increase in waste generation by 48 64 thous tons vs 2014 is due to increase of share of ash wastes of the green hazard list
Efficient management of ash dumps and gradual in-crease of share of ash wastes efficient use is one of the key areas of waste management activity of the Group of Com-panies Thus, in 2015 based on concluded agreements 14,240 tons of ash wastes (fly ash light fraction) were sold for usage in road construction
The most important actions of 2015 related to wastes management were aimed at improvement of industrial and environmental safety of ash dumps and other waste disposal facilities:
– construction of the 2nd section of ash dump at CHP-3 (PAVLODARENERGO JSC);
– recultivation of the 1st section of ash dump at CHP-3 (PAVLODARENERGO JSC);
– construction of the 2nd section of ash dump at CHP-2 (PAVLODARENERGO JSC);
– construction of the 2nd section of ash dump at Eki-bastuz CHP (PAVLODARENERGO JSC);
– recultivation of ash dump No 3 (SEVKAZENERGO JSC);– management of sites for storage of the wastes gener-
ated during modernization and construction of power facilities (preparation of sites, installation of contain-ers)
During construction of new ash disposal pits an inno-vative technology of impervious screen in ash dump bed – Canadian polysynthetic geomembrane – was used Use of the special film – geomembrane – allowed to achieve 100% water proofing It is a reliable and durable imper-vious screen ensuring protection of soil and ground water against contamination due to the chemical components contained in clarified water of the hydraulic ash removal (HAR) closed-circuit system
ENVIRONMENTAL MANAGEMENT SYSTEM
Subsidiaries of the Group of Companies were among the first in Kazakhstan that obtained a certificate of com-pliance with the ISO 14001 international environmental management standard
Availability of the environmental management sys-tem that is developed, well-functioning and certified for compliance with the ISO 14001 Series is an important in-dicator of a systematic, efficient work in the sphere of en-vironmental protection, contributing to the improvement of Corporation’s competitiveness, increase of market val-ue of shares, creation of a positive image in relations with external stakeholders
During the reporting period the TÜV Rheinland Inter Cert company (leader in the independent examination and certification industry) carried out supervisory and re-certification audits of compliance of the subsidiaries of CAEPCO JSC with the international standards ISO 14001
(Environmental Management System), ISO 9001 (Qual-ity Management System), OHSAS 18001 (Occupation-al Health and Safety Management System), ISO/IEC 17025:2005 (General requirements for the competence of testing and calibration laboratories), ISO/CD 50001 (Energy Management System) As a result, the compa-nies achieved Integrated Management System (IMS) cer-tification, confirmed that their system is robust, efficient, and focused on improvement
Akmola electricity distribution company JSC plans to implement and obtain international certificates of com-pliance with ISO 9001, 14001, 18001 and 50001 stan-dards in 2016–2017 and together with other subsidiaries of the Corporation continue fulfillment of commitments to comply with the ISO international standards, confirm, and extend earlier obtained certificates on an annual ba-sis
G4-EN9, G4-EN10 Total water consumption by sources, thousand m3
Indicator 2013 2014 2015
Total water used, including: 611,861 9 582,477 8 540,137 6
from surface-water bodies 14,308 8 11,561 7 11,032 3
from third-party suppliers 24,158 3 24,038 4 24,873 3
from closed-circuit water systems 558,207 5 532,370 4 490,700 9
from water reuse 13,208 4 14,507 2 13,531 1
Volume of discharged waste water, thousand m3 (discharged to third parties)
Indicator 2013 2014 2015
Total waste water generated 525 86 504 07 469 15
Separated to third party organizations 525 86 504 07 469 15
Total weight of generated wastes, thous. tons
Indicator 2013 2014 2015
Ash wastes 2,522 2,389 2,437
Other types of wastes 9 6 14 08 14 4
Wastes by hazard levels, thous. tons
Indicator 2013 2014 2015
Wastes generation: 2,532 2,403 2,452
Green list 2,530 2,402 2,451
Amber list 1 312 1 311 1 20
Wastes by method of handling, thous. tons
Indicator 2013 2014 2015
Wastes generation 2,532 2,403 2,452
including ash wastes 2,522 2,389 2,437
Wastes used at the company 3 3 3 1 1 9
Wastes decontaminated 0 019 0 018 0 009
Wastes transferred to third parties 5 69 10 9 12 7
Wastes disposed at company’s own sites 2,524 2,390 2,424
including ash and slag wastes 2,522 2,389 2,423
70 71
SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
The Corporation adheres to the following principles of information disclosure:
y ensuring the completeness and accuracy of the dis-closed information;
y promptness in the disclosure of all significant facts of its activities;
y regularity and timeliness in disclosing information about the Corporation;
y relevance of information; y ensuring a high level of protection for the commer-cial, professional and other confidential information, protected by the law of the Republic of Kazakhstan;
y maintaining a reasonable balance between trans-parency of the Corporation and compliance with its commercial interests;
y information support for the managerial decision- making;
y communicating to employees of the Corporation and its subsidiaries a relevant, timely, complete, accurate and objective information through various informa-tional channels, including the corporate websites and corporate publications;
y preventing loss, leakage and distortion of informa-tion;
y informational countermeasures in case negative mes-sages arise
INFORMATION POLICY
GRIEVANCE MECHANISM G4-EN34
The subsidiaries of the Corporation that work directly with customers and the society keep records of submit-ted complaints and grievances as follows:
– hotline;– recording of grievances of individuals and legal enti-
ties in special log books;– audio recording and keeping records for 30 days (all
appeals are considered, replied in written with adopt-ing necessary measures);
– holding public hearing with population of the city re-gion with participation of mass media (local TV-chan-nels) and publishing information in local print press prior to implementation of the projects related to modernization and reconstruction of power facilities;
– questioning customers in order to find out their satis-faction/dissatisfaction with the performance of em-ployees of the customer service center (CSC);
– daily receiving claims from customers concerning in-sufficient heating supply by phone and in written;
– for improvement of the grievance mechanisms, on the official websites the following columns were created: “Customer Service Headquarter”, “Anti-corruption”, “Questions-Answers”, “Feedback”; they are used to receive the grievances submitted by external stake-holders, published in mass media, posted in blogs of city and region Akimats’ management, received through monitoring of the information field in exter-nal environment;
During the reporting period the Corporation received 64,144 appeals from customers, 773 of them were of “complaint” type or mentioned negative fact, including 383 grievances received via hotline All appeals were re-plied, all grievances considered, actions were taken to remedy negative consequences In 2015 no grievances related to the environmental impact were received
The information policy of CAEPCO JSC is a set of ac-tions, events and procedures, ensuring management of corporate information dissemination and creating a con-sistent image of the Corporation among its target audi-ence
The Information Policy is aimed at efficient interac-tion with various public groups, including:
y Government and regulatory authorities; y Mass Media; y Shareholders and investors; y Customers and partners; y Employees and trade unions; y Non-governmental organizations (NGOs)
In 2015 CAEPCO JSC Group of companies was reg-ularly communicating information about its activities to the above-listed public groups by updating the official websites of the Corporation and its subsidiaries, mak-ing publications in mass media, providing responses to the requests, and arranging public hearings, press tours, round tables and other events
In 2015 actions of the Stakeholder Engagement Plan (SEP) were implemented by the Corporation in compliance with the policy of the European Bank for
Reconstruction and Development As a follow-up of the plan implementation, a public report was posted on the official websites of the Corporation and its subsidiar-ies, disclosing information about the activities aimed at stakeholder engagement The main objectives of this in-formation disclosure are as follows:
y timely provision of information on all important mat-ters related to the Corporation in order to maintain the legitimate rights of shareholders, investors, and other stakeholders for the information that is required for making an informed decisions or undertaking any other actions that could affect the financial and eco-nomic performance of the Corporation, as well as any other information contributing to a comprehensive understanding of the corporate activities;
y ensuring the availability of public information about the Corporation for all the stakeholders;
y increasing transparency and confidence in relations between the Corporation and its shareholders, po-tential investors, market participants, governmental authorities and other stakeholders;
y improvement of corporate governance within the Corporation;
y creation of a favorable image
HUMAN RESOURCES AND SOCIAL POLICY
HUMAN RESOURCES MANAGEMENT POLICY
Human Resources Policy of CAEPCO JSC is a compre-hensive system of interaction with employees to achieve strategic goals of the Corporation
The objective of the Human Relations Policy of CAEPCO JSC is building up a company with an efficient corporate governance system, providing opportunities for maxi-mizing employees potential
The corporation is strengthening its Human Relations Policy by engaging professional employees of various level, retaining highly qualified employees, providing continuous professional training and development for employees, opening up opportunities for professional growth of initiative young employees, creating a talent pool and managing talents
The Human Rights Policy of the Corporation is based on the following principles:
y Openness and transparency in recruitment for vacant positions;
y Value of professional competence; y Focus on development: personal, professional, corpo-rate;
y Corporate social responsibility
EMPLOYEE HEADCOUNT AND QUALITY
Payroll headcount of the Corporation was 10,938 persons as of December 31, 2015 vs 10,718 persons in 2014 and 8,124 persons in 2013 This headcount in-crease of 2% vs 2014 is due to reduction of personnel
turnover and hiring persons for vacant positions in opera-tions 31 9% of headcount increase in 2014 vs 2013 was due to the acquisition of Akmola electricity distribution company JSC as a part of the CAEPCO JSC’s geographic business expansion strategy G4-LA1
Payroll Headcount by Company within CAEPCO JSC for 2015 G4-LA1
Company name Number of employees
CAEPCO JSC 91
PAVLODARENERGO JSC 5,132
SEVKAZENERGO JSC 2,586
AEDC JSC 2,495
Astanaenergosbyt LLP 634
Total: 10,938
Payroll headcount trend, pers.
201520142013
8,124
10,718 10,938
72 73
SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
EMPLOYEE STRUCTURE BY CATEGORY AND GENDER
Due to the nature of the business, the Corpora-tion’s employee structure is dominated by men, with a share of 62 5% Production personnel are mostly blue-collar workers, with men accounting for 73 4%
In 2015, “managers” made up 13 8% of the total employee headcount, which is an optimal rate There-at share of male employees in this employee category is 76 3% and share of female employees is 23 7%
EMPLOYEE STRUCTURE BY AGE G4-LA1, G4-LA12
There is a high proportion of workers in the most pro-ductive age bracket – under 40 years old – they make up 51 5% of the total headcount Employees over 60 years old make up 6 4%
As a part of the Human Resources Policy implementa-tion, the Corporation carries out actions aimed at gradu-al reduction of personnel’s average age for achieving an optimal ratio between the young initiative employees and the experiences, highly qualified employees in order to ensure succession and transfer of professional knowledge and skills
EMPLOYEE STRUCTURE BY EDUCATION G4-LA10
In general, in 2013–2015 the Corporation has an in-creasing trend in the share of the production personnel with technical/vocational education
In 2015, 59 employees completed higher education correspondence training, including 27 employees in their job related fields; 35 employees completed technical/vo-cational correspondence training, including 29 employ-ees in their job related fields
In total in 2015 share of employees with a higher education in the Corporation made up 30 6% of the to-tal headcount: this is an increase of 0 7% vs 2014, and 1 6% vs 2013
With the head count growing, the number of em-ployees with only secondary education is falling
TRAINING AND DEVELOPMENT OF PERSONNEL
Personnel training and development system of the Corporation covers the following areas:
y compulsory, normative training; y management skills development; y professional skills development
In order to improve efficiency of activity and create safe working conditions the companies of the Corpora-tion carry out training in accordance with its corporate format and individual development plans G4-LA10
In 2015, 8,061 persons (73,7% of the total head-count) were trained, including 6,318 persons of produc-tion personnel (63 3%) on a compulsory basis
In 2015, 3,713 persons, i e is 34% of the total head-count, were trained in training centers of the Corporation
In order to develop professional and managerial skills 297 employees from top-managers and all executive-level managers received corporate training in 2015
EMPLOYEE TURNOVER G4-LA1
In 2015, employee turnover rate of the Corporation in general went down to 12 8% due to implementation of a number of improvement initiatives, such as:
y Optimization of the headcount of companies in order to find remuneration reserves and use these funds to raise wages;
y Promoting mentoring and incentives for young spe-cialists;
y Tangible and intangible incentives for skilled workers; y Better social guarantees in accordance with collective bargaining agreements
TALENT POOL G4-LA10
In order to ensure availability of required person-nel reserves for managerial positions of various levels the subsidiaries of CAEPCO JSC in 2015 created a tal-ent pool of 926 managers for senior, middle and junior
management positions Succession planning is based on individual programs of professional and management training, including training in the own training centers, skills improvement, internships, mentoring, performing
Employee structure by age
28.2%
23.4%
19.1%
22.9%
6.4%
40–50 years old
30–40 years old
under 30 years old
50–60 years old
over 60 years old
Employee category Total including
men women
Persons % Persons % Persons %
Payroll Headcount 10,938 100 0 6,841 62 5 4,097 37 5
managers 1,511 13 8 1,153 76 3 358 23 7
white-collar workers 3,073 28 1 1,027 33 4 2,046 66 6
blue-collar workers 6,354 58 1 4,661 73 4 1,693 26 6
Educational level trend
41%
30.6%
higher
secondary
technical/vocational
201520142013
40.1%39%
32% 30% 28.4%
29% 29.9%
Item 2013 2014 2015
Number of employees who received training, retraining, or professional development, including:
6,536 7,208 8,061
Safety and fire safety precautions, operating procedures (initial training, qualification, certification/re-certification), courses for managers
5,499 5,348 6,318
ISO 9001, ISO 14001, OHSAS 1800 quality management system trainings (including environmental protection, internal audit and risk management aspects)
73 30 16
Related occupations training 348 1,270 603
Civil defense and emergency training 22 17 21
Other (professional development, seminars, workshops, etc ) 594 543 1,103
Turnover Rate
201520142013
15.2%
14.5%
12.8%
74 75
SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
AVERAGE EARNINGS GROWTH RATE BY SUBSIDIARY OF CAEPCO JSC
The fact that salaries in the AEDC JSC group of com-panies did not increase in 2015 is due to reduction of
expenses in the rates estimate and spending profit for fulfilling its investment program
INTANGIBLE INCENTIVES
In order to increase motivation to working efficiently, every year the Corporation undertakes employee recogni-tion initiatives giving out awards, certificates of merit and titles for achieving high production results; details about such initiatives are published in corporate sources of infor-mation
In 2015, 75 employees received corporate awards for operational excellence, 21 employees and veterans
received state awards, 8 employee received awards from the CIS Electric Power Council, 23 employees received awards from the Kazakhstan Energy Association, among them 6 employees were awarded the title of Distinguished Energy Worker and 6 employees with the title of Eminent Energy Worker
INTERACTION WITH TRADE UNIONS
All subsidiaries of CAEPCO JSC have trade union orga-nizations, and collective bargaining agreements are a nor-mal practice Social policy of CAEPCO JSC is determined together with employees and trade unions are represent-ing them
PAVLODARENERGO JSC has a collective bargain-ing agreement valid till 2015 inclusively, AEDC JSC and SEVKAZENERGO JSC have collective bargaining agree-ments for 2014–2016
G4-LA4
Collective bargaining agreements provide social guarantees and benefits for employees, their families, retirees and veterans of the companies When designing a Collective Bargaining Agreement, the Corporation’s companies adhere to the principles of economic feasibili-ty, sufficiency, joint responsibility and transparency
management functions and temporary employee reloca-tion External talent pool creation is also under way In
2015, 96 people from the talent pool were appointed to management positions
ATTRACTING YOUNG SPECIALISTS G4-LA12
In 2015 the PROFENERGY project was launched; it includes development of the program for supporting young specialists and graduates and appointing them to key/critical positions in the companies, development and improvement of educational level of personnel and retaining key employees
The PROFENERGY project has many benefits for stu-dents and in 2016 it will be implemented in all companies of the Corporation
On November 30, 2015 a social partnership agree-ment between the management of SEVKAZENERGO JSC, representatives of higher and vocational educational institutions and the Chamber of Entrepreneurs of Pet-ropavlovsk was signed; it is aimed at cooperation under the Program for support of young specialists
This Program includes the following actions for stu-dents:
- syllabus improvement;- paid practical training;- temporary employment for the period of vacation;- competition of scientific papers;- granting educational scholarship;- participation in examination boards
Actions of this Program aimed at the young special-ists already employed at the companies of the Corpora-tion include:
- payment for a correspondence education;- payment for an educational leave;- reimbursement of expenses for transport to the
place of training
960 young specialists work at the companies of the Corporation, 239 of them were hired in 2015, includ-ing 149 persons for leading positions and professions Thereat number of hired employees with technical/voca-tional education is 129 persons (54%), with higher edu-cation – 110 persons (46%)
In 2015, the Corporation arranged 72 field trips to production sites, 324 students had on-the-job and pre-graduation trainings, 145 employees are enrolled in higher education programs via correspondence, includ-ing 95 employees in their job related fields, 97 employees are enrolled in technical/vocational training programs via correspondence, including 86 employees in their job re-lated fields
There is a trend of increase in the share of employees with technical vocational education in the Corporation The PROFENERGY project provides for implementation of the state policy of technical specialists development
EMPLOYEE MOTIVATION AND REMUNERATION
The goal of the Corporation’s motivation and remuner-ation system is to attract, retain and motivate employees
to ensure the Corporation can achieve its mission and busi-ness targets at an optimal cost
Average income in the subsidiaries in 2015 increased by 4 6% vs 2014 and by 13 3% vs 2013
In 2015 actions for transition to a Unified Remuner-ation System in subsidiaries of CAEPCO JSC were taken; they aim at creation of flexible tangible incentives taking into consideration internal and external factors, including remuneration distribution based on type of participation in the production process, analysis of social factors and labor market in the regions where the Corporation oper-ates The new remuneration system provides for the use of a comprehensive approach for identifying remunera-tion level depending on a complexity of the job and a level of professional and personal skills of an employee; it aims at intensifying employee’s motivation to improving labor productivity, professional skills and qualification
+8.9%
PAVLODARENERGO Group SEVKAZENERGO Group AEDC Group Astanaenergosbyt LLP
-8
42
92
142
192
2013 2014 2015
+6.0%+11.3%
+6.7% +2.5%0%
+10.9%
+4.5%
Item 2013 2014 2015
Number of employees in trade unions, pers 6,796 6,788 6,937
Percentage of total headcount, % 65 63 63
76 77
SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
OCCUPATIONAL HEALTH AND SAFETY STRATEGIC GOALS AND IMPLEMENTED ACTIONS
Occupational Health and Safety is one of priority val-ues for CAEPCO JSC and it is considered to be an integral part of the Corporation’s business system
The key priorities of the Health and Safety Policy of the Corporation and its subsidiaries are the following: protection of health and life of employees, creation of safe working conditions, injury prevention, improvement of industrial, sanitary and household working conditions, minimization of exposure to hazardous and adverse fac-tors, reduction of industry-specific risks and occupational hazards
Strategic goals of the Corporation related to Occupa-tional Health and Safety are as follows:
y injury reduction; y improving workplace safety and the occupational safety and health management system;
y improving working conditions; y preventing unsafe actions of employees through systematic training and drills on safe techniques and skills;
y improving employee incentive system in the field of occupational health and safety;
y development and implementation of uniform corpo-rate standards on occupational health and safety;
y study and communication of modern best practic-es, best practices in occupational health and safety G4-LA5
In order to achieve goals of the Corporation the follow-ing documents were developed and implemented in 2015:
– Regulations on the procedure for notification and investigation of process violations and incidents at the subsidiaries of CAEPCO JSC;
– Book of special clothes for industrial workers (blue collars and white collars) Corporate style require-ments
In addition to that, the following practices were imple-mented:
– visualization of safety induction trainings by presenta-tion slides and films;
– photo recording of emergency response drills that allows to monitor the drills and have a follow-up on actions of the personnel analyzing its mistakes;
– investigation of incidents using advanced analytical methods of “Five Whys”, “Cause tree” and others allowing to determine incident’s root causes
In 2015 PAVLODARENERGO JSC and its subsidiary – Pavlodar Heat Networks LLP were audited for the compli-ance with the OHSAS 18001 international occupational health and safety standard Compliance of the companies was confirmed
In 2015 at each company of the Group the Health and Safety Department of CAEPCO JSC carried out two health and safety audits (initial and control audits) based on which they gave relevant comments and rec-ommendations, identified the tasks to be solved, not-ed the good practices to be developed and supported
OCCUPATIONAL HEALTH AND SAFETY TYPES AND RATES OF OCCUPATIONAL INJURIES
During the reporting period there were 4 incidents in the companies of the Group, including by region of oper-ation:
– 2 in the Pavlodar region (PAVLODARENERGO JSC);– 1 in the North-Kazakhstan region (SEVKAZENERGO
JSC);– 1 in the Akmola region (AEDC JSC)
Type of the incidents that caused injuries:– railway traffic accident;– fall from height;– road traffic accident with participation of Corpora-
tion’s transport;
– exposure to moving, scattering, rotating pieces and elements
Causes of the incidents were:– gross negligence of the injured person;– unsatisfactory labor management;– incompliance with the health and safety instruction
requirements
It is important to note that there were no fatalities in 2015
The production injury rates of the Corporation are pre-sented in the Table and charts below G4-LA6
Occupational Injury Rates
2013 2014 2015
Payroll Headcount 8,124 10,622 10,938
Number of injury cases 3 3 4
Number of injured persons / number of women among them 3/0 3/0 4/1
Number of fatalities 2 2 0
Total Incident Frequency Rate (TIFR) per 1,000 employees
Total Incident Frequency Rate per 1,000 of employees was calculated in accordance with the following formula:
Fr = n ∙ 1,000/N, where
n – total number of the persons injured in incidents in the reporting period;N – average payroll headcount
Fatality Incident Frequency Rate (FIFR) per 1,000 employees
Fatality Incident Frequency Rate (FIFR) per 1,000 em-ployees was calculated in accordance with the following formula:
Fr1 = n1 ∙ 1,000/N, where
n1 – total number of fatalities in the reporting period;N – average payroll headcount
Коэффициент частоты всех несчастных случаев травматизма на производстве (TIFR - Total Incident Frequency Rate) на 1000 работников
201520142013
0.370.28
0.36
Коэффициент частоты несчастных случаев со смертельным исходом (FIFR - Fatality Incident Frequency Rate) на 1000 работников
201520142013
0.26 0.180
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SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
The incident recording, reporting and notification system of the Corporation complies with the require-ments of the law of the Republic of Kazakhstan and the International Labor Organization (ILO)
In 2015 the Corporation also implemented the prac-tice of:
– investigation of micro-injuries, incidents, near-misses being a basement for more serious injuries and dam-age in the future;
– preparation of newsletters for providing information about incidents and communicating it to the person-nel of all companies of the Subsidiaries of the Corpo-ration in order to share information about their causes and prevent repetition of similar cases in the future
For occupational injuries prevention, monitor-ing and accounting of health and safety violations the
Corporation and its Subsidiaries carry out the following work:
– training of personnel on health and safety, electrical safety and assessment of their knowledge;
– carrying out planned and random health and safety audits;
– arranging Health and Safety Days;– holding occupational health and safety meetings;– equipping work places in accordance with safety
requirements;– placing information posters and safety signs at work
places;– holding professional competitions;– arranging demonstrative work permit events, etc
Main performance indicators of health and safety preventive measures are presented in the Table below
Main health and safety preventive measures performance indicators
2013 2014 2015
Number of occupational health and safety meetings held 248 230 239
Number of Occupational Health and Safety Days held 286 474 610
In 2015, the Corporation spent 326 KZT mln for oc-cupational health and safety activities, creation of bet-ter working conditions
The funds were spent for providing employees with the required personal protective equipment, includ-ing electric safety devices, special food and medical supplies Information posters, publications of health and safety normative technical documents and laws,
fire-fighting equipment were procured Additional workplace illumination, ventilation and air-conditioning systems repair, building renovation and other activities were carries out
All employees of the Corporation are insured against accidents, as required by the law of the Republic of Ka-zakhstan “On compulsory employee insurance against workplace accidents ”
EMPLOYEES OF THE CORPORATION WHOSE PROFESSIONAL ACTIVITY BEARS HIGH INJURY RISK G4-LA7
Works related to maintenance and repair of power equipment bears high injury risk Electricians/electrical fitters are the employees whose professional activity bears high injury risk
In order to ensure safety of personnel during work at electric installation:
– personnel is trained;– organizational and technical measures are taken,
their implementation is controlled;– all required personal protective equipment, electric
safety devices, etc are provided to the personnel
During the reporting period there were no cases of electric injury of personnel in the subsidiaries of the Cor-poration
In order to ensure safe repair and commissioning works of power equipment the Corporation intends to start the process of implementation of the Lock out/Tag out (LOTO) procedure in 2016
PLANS FOR THE FORTHCOMING PERIOD
In 2016 the Corporation plans to implement and sup-port the following corporate standards and documents related to occupational health and safety:
y Carrying out behavioral safety audits; y Implementing workplace passports; y Carrying out safety cross-audits; y Interaction/communication with personnel about occupational health and safety;
y Motivation of personnel to comply with health and safety requirements
The Corporation is implementing an Environmental and Social Action Plan (ESAP) and a Stakeholder Engage-ment Plan (SEP) in accordance with the policy of the Eu-ropean Bank for Reconstruction and Development Ac-cording to the ESAP, annual public reports are prepared with information on projects aimed at improving occupa-tional safety at the companies of CAEPCO JSC
Akmola electricity distribution company JSC (AEDC JSC) with financing of the Asian Development Bank (ADB) is implementing an Environmental and Social Manage-ment System (ESMS) in accordance with the ADB’s Safety Mission Statement (2009, ADB’s SMS) and other social policies of the Bank, such as the Social Protection Strat-egy (2001), the Gender Equality Policy (1998) and the Public Relations Policy (2011) with regular submission to the ADB of the reports on environment and social sphere monitoring in regards of the AEDC’s projects related to modernization and expansion of electrical distribution networks, aimed at enhancement of reliability of the net-work, reduction of losses and minimization of downtime through better infrastructure
CORPORATE EVENTS
Every year, employees of CAEPCO JSC’s Subsidiaries actively participate in sports and recreational activities in the companies, as well as on regional and international levels The practice of holding sports events within the companies allows the teams to achieve winning places in external competitions
AEDC JSC regularly participates in sports competi-tions between industrial companies of Astana city and the Akmola region; in 2015 the team of AEDC JSC won the second place in the competition of the Samruk table tennis unified open league During the reporting period employees of SEVKAZENERGO JSC retained honorable second place in the Densaulyk annual sports event in var-ious sport contests
As a part of celebration of the professional holiday – Energy worker’s day, internal sport events with a number of competitions are held, the most popular among them are volleyball, table tennis, mini-football, swimming, chess, fishing
Celebration of Nauryz Meyramy has already become an established tradition in the Corporation; during this celebration Kazakh customs are presented and tradition-al competition – asyk atu and tug-of-war are held
80 81
SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
Subsidiaries of the CAEPCO JSC are active participants of the social projects aimed at support of population in the regions where they operate
PAVLODARENERGO JSC, being an organizer and a general sponsor of the republican youth tennis tournament, holds an annual international tournament PAVLODAR OPEN
SEVKAZENERGO JSC for many years sponsors chil-dren of the Zhuldyzdar sponsored family with making memory gifts to pupils and graduates of the school on holiday and organizing their leisure time during vaca-tions
On the threshold of the 70 years anniversary of the Victory in the World War II, as initiated by employees of NK REDC JSC a “Victory Square” was open with planting of trees and installation of a memorial plate
Every year, all companies of the Corporation honor the WWII and labor veterans, providing material support to the non-working retirees in the form of food packag-es, cash rewards and coal supplies Veterans are provid-ed with home care, invited to concerts and gala dinners during the WWII Victory Day celebrations
In 2015 with participation of SEVKAZENERGO JSC as a part of public-private partnership the Alakay kindergar-ten for 320 children of employees of companies of the Group and other residents of Petropavlovsk was open
In 2015 PAVLODARENERGO JSC and Petropavlovsk heat networks LLP had their 50 years anniversary
To celebrate the anniversary the PAVLODARENERGO JSC group of companies held a number of events:
– children drawing and crafts contest;– competition between the journalists and camera
operators covering development of energy industry in the region;
– preparation and presentation of the book “Accumu-lating Energy of Generations” devoted to the history of power energy industry development in the Irtysh area in the Pavlodar region;
– Retrofest competition with involvement of musical-ly-gifted employees
Petropavlovsk heat networks LLP held a child art competition among the children of company’s employ-ees and the Zhuldyzdar sponsored family
In 2015 for the first time at the level of the Group of Companies a corporate interactive event - wit and humor competition – was held aimed at strengthening of the corporate culture
CHARITY AND SPONSORSHIP
DISCLOSURE OF MATERIAL ASPECTS AND INDICATORS IN THE REPORT AND COMPLIANCE WITH GRI G4 GUIDELINES (SOCIAL CATEGORY)
Table of Report’s Compliance with the GRI G4 Guidelines
No Indi-cator Index
Indicator Name Disclosed Provision of the Report and Comments
Strategy and Analysis
1 G4-1 Statement from the most senior decision-maker of the organization about the relevance of sustain-ability to the organization and the organization’s strategy for addressing sustainability
Completely Section: Letter of the Chairman of the Board of Directors, page 10-11Section: Letter of the President, page 12-13
2 G4-2 Description of key impacts, risks, and opportunities Completely Section: Analysis of the risks having significant impact on performance, page 57-59
Organization’s profile
3 G4-3 Name of the organization Completely Section: Company’s profile, page 3
4 G4-4 Primary brands, products, and/or services Completely Section: Company’s profile, page 3Section: Business model, page 16
5 G4-5 Location of the organization’s headquarters Completely Section: Contacts, page 96
6 G4-6 Number of countries where the organization operates, and names of countries where either the organization has significant operations or that are specifically relevant to the sustainability topics covered in the Report
Completely Section: Geography of operations, page 6
7 G4-7 Nature of ownership and legal form Completely Section: Corporation structure, page 17
8 G4-8 Markets served (including geographic breakdown, sectors served, and types of customers and benefi-ciaries)
Completely Section: Geography of operations, page 6Section: Subsidiaries, page 18-19
9 G4-9 Scale of the organization, including: y total number of employees; y total number of operations; y net sales; y total capitalization broken down in terms of
debt and equity; y quantity of products or services provided
Completely Section: Human Resources and social policy, page 71-75Section: Key performance highlights for 2013–2015, page 5Section: Results in 2015, page 35-36Section: Financial and economic indica-tors, page 37-40
10 G4-10 Total number of employees by employment contract and gender;
y total number of permanent employees by em-ployment type and gender;
y total workforce by employees and supervised workers and by gender;
y total workforce by region and gender; y portion of the work performed by workers who
are legally recognized as self-employed, or by individuals other than employees or supervised workers, including employees and supervised employees of contractors;
y seasonal variations in employment numbers
Partially Section: Human Resources and social policy, page 71-75
11 G4-11 Percentage of total employees covered by collective bargaining agreements
Completely 63% of employees are covered by a col-lective bargaining agreement
12 G4-12 Organization’s supply chain Completely Section: Business model, page 16
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SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
No Indi-cator Index
Indicator Name Disclosed Provision of the Report and Comments
26 G4-26 Organization’s approach to stakeholder engage-ment, including frequency of engagement by type and by stakeholder group;indication of whether any of the engagement was undertaken specifically as part of the report prepa-ration process
Partially Section: Stakeholder engagement, page 63-64
27 G4-27 Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting
So far the Corporation does not include stakeholders in the process of annual report preparation directly, however it is planned to be done in future In particular as a part of this Sustainable Development Report a Feedback form was prepared in order to get a feedback from stakehold-ers
Report Profile
28 G4-28 Reporting period for the information provided Completely Section: About the report, page 3
29 G4-29 Date of the most recent previous Sustainability Development Report
Completely Section: About the report, page 3
30 G4-30 Reporting cycle Completely Section: About the report, page 3
31 G4-31 Contact point for questions regarding the report or its contents
Completely Section: Contacts, page 96
32 G4-32 Information about the ‘in accordance’ option the organization has chosen during preparation of the report in accordance with the GRI guidelines GRI Content Index for the chosen option of report preparation Certificate of the public (external) report assurance, if the report has been externally assured
Partially Section: About the report, page 3Section: Table of Report’s Compliance with the GRI G4 Guidelines, page 81-85
33 G4-33 Organization’s policy and current practice with regard to seeking public (external) assurance for the sustainable development report
Completely No external assurance was used for this report The Corporation does not find it reasonable in medium term
Governance
34 G4-34 The governance structure of the organization, in-cluding committees of the highest governance body in charge of economic, environmental and social impacts of the organization
Completely Section: Organizational structure, page 44-45Section: Committees of Board of Direc-tors, page 50
Ethics and Integrity
35 G4-56 Organization’s values, principles, standards and norms of behavior such as codes of conduct and codes of ethics
Partially Section: Report on compliance with Cor-porate governance code, page 53
Category: EnvironmentalAspect: Materials
36 G4-СПМ Disclosures on Management Approach Completely Section: Environmental Impact Manage-ment, page 64
37 G4-EN1 Materials used by weight or volume Completely Section: Environmental Impact Manage-ment, page 64
Aspect: Water
38 G4-СПМ Disclosures on Management Approach Completely Section: Water management and water resources conservation, page 67-68
39 G4-EN8 Total water withdrawal by source Completely Section: Water management and water resources conservation, page 67-68
40 G4-EN9 Water sources significantly affected by withdrawal of water
Completely Section: Water management and water resources conservation, page 67-68
41 G4-EN10 Percentage and total volume of water recycled and reused
Completely Section: Water management and water resources conservation, page 67-68
GRI G4 COMPLIANCE TABLE FOR THE MANAGEMENT REPORT
No Indi-cator Index
Indicator Name Disclosed Provision of the Report and Comments
13 G4-13 Significant changes during the reporting period regarding the organization’s size, structure or own-ership, including:
y changes in the location of, or changes in, oper-ations, including facility openings, closings, and expansions;
y changes in the share capital structure and other capital formation, maintenance, and alteration operations;
y changes in the location of suppliers, the struc-ture of the supply chain, or in relationships with suppliers, including selection and termination
Partially Section: Organizational structure, page 44-45Section: Share capital structure, page 43
14 G4-14 Application of the precautionary approach Completely Section: Environmental expenditures, page 66-67
15 G4-15 Externally developed economic, environmental and social charters, principles, or other initiatives to which the organization subscribes or which it endorses
Completely Section: Environmental Impact Manage-ment, page 64-65Section: Greenhouse gas emissions, page 66Section: Environmental management system, page 69-70
16 G4-16 Memberships of associations, industry and/or national and international advocacy organizations in which the organization:
y holds a position on the governance body; y participates in projects or committees; y provides substantive funding beyond routine
membership dues; y views membership as strategic
Partially The Corporation is a member of the Kazakhstan Electricity Association
Identified Material Aspects and Boundaries
17 G4-17 List of the legal entities included in the organiza-tion’s consolidated financial statements
Completely Section: About the report, page 3
18 G4-18 Methods of defining the report content and the Aspect Boundaries;Explanation of how the organization has imple-mented the Reporting Principles for Defining Report Content
Completely Section: Material aspects and boundaries, page 61-62
19 G4-19 List of all the material Aspects identified in the pro-cess for defining report content
Completely Section: Material aspects and boundaries, page 61-62
20 G4-20 Description of each material Aspect, the Aspect Boundary within the organization (including list of entities or groups of entities specified in clause 3 2 and for which the Aspect is material)
Partially Section: Material aspects and boundaries, page 61-62
21 G4-21 Description of each material Aspect, the Aspect Boundary outside the organization (including a list of entities, groups of entities, elements and geo-graphical regions for which the Aspect is material)
Partially Section: Material aspects and boundaries, page 61-62
22 G4-22 Effect of any restatements of information provid-ed in previous reports, and the reasons for such restatements
Completely Indicators were not changed and are comparable with the data provided in previous annual reports of the Corporation
23 G4-23 Significant changes from previous reporting periods in the Scope and Aspect Boundaries
Completely A Sustainable Development report is prepared for the first time
Stakeholder Engagement
24 G4-24 List of stakeholders engaged by the organization Completely Section: Stakeholder engagement, page 63-64
25 G4-25 Basis for identification and selection of stakeholders with whom to engage
Completely Section: Stakeholder engagement, page 63-64
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SUSTAINABLE DEVELOPMENT 2015ANNUAL REPORT
No Indi-cator Index
Indicator Name Disclosed Provision of the Report and Comments
Aspect: Emissions
42 G4-СПМ Disclosures on Management Approach Completely Section: Greenhouse gas emissions, page 66
43 G4-EN15 Direct greenhouse gas emissions Completely Section: Greenhouse gas emissions, page 66
44 G4-EN18 Greenhouse gas emissions intensity Completely Section: Greenhouse gas emissions, page 66
45 G4-EN19 Reduction of greenhouse gas (CO2) emissions Completely Section: Greenhouse gas emissions, page 66
46 G4-EN21 NOx, SOx, and other significant air emissions Completely Section: Atmospheric air protection, page 65
Aspect: Effluents and Wastes
47 G4-СПМ Disclosures on Management Approach Completely Section: Efficient management and dis-posal of production wastes, page 68-69
48 G4-EN22 Total water discharge by quality and destination Completely Section: Efficient management and dis-posal of production wastes, page 68-69
49 G4-EN23 Total weight of waste by type and disposal method Completely Section: Efficient management and dis-posal of production wastes, page 68-69
Aspect: Products and Services
50 G4-СПМ Disclosures on Management Approach Completely Section: Atmospheric air protection, page 65
51 G4-EN27 Extent of impact mitigation of environmental im-pacts of products and services
Completely Section: Atmospheric air protection, page 65
Aspect: Compliance
52 G4-СПМ Disclosures on Management Approach Completely Section: Environmental expenditures, page 66-67
53 G4-EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
Completely Section: Environmental expenditures, page 66-67
Aspect: Overall
54 G4-СПМ Disclosures on Management Approach Completely Section: Environmental expenditures, page 67
55 G4-EN31 Total environmental protection expenditures and investments by type
Completely Section: Environmental expenditures, page 67
Aspect: Environmental Grievance Mechanisms
56 G4-СПМ Disclosures on Management Approach Completely Section: Grievance mechanism, page 70
57 G4-EN34 Number of grievances about environmental impacts filed, addressed, and resolved through formal griev-ance mechanisms
Completely Section: Grievance mechanism, page 70
Category: Social - Sub-Category: Labor Practices and Decent WorkAspect: Employment
58 G4-СПМ Disclosures on Management Approach Completely Section: Human resources management policy, page 71
59 G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender and region
Completely Section: Employee headcount and quality, page 71Section: Payroll headcount by company, page 71Section: Employee structure by age, page 72Section: Employee structure by category and gender, page 71Section: Employee turnover, page 73
No Indi-cator Index
Indicator Name Disclosed Provision of the Report and Comments
Aspect: Labor/Management Relations
60 G4-СПМ Disclosures on Management Approach Completely Section: Interaction with trade unions, page 75
61 G4-LA4 Minimum notice periods regarding operational changes, including whether these are specified in collective agreements
Completely Section: Interaction with trade unions, page 75
Aspect: Occupational Health and Safety
62 G4-СПМ Disclosures on Management Approach Completely Section: Occupational Health and Safety Strategic Goals and Implemented Actions, page 76
63 G4-LA5 Percentage of total workforce represented in formal joint management–worker health and safety com-mittees that help monitor and advise on occupation-al health and safety programs
Completely Section: Occupational Health and Safety Strategic Goals and Implemented Actions, page 76
64 G4-LA6 Type of injury and rates of injury, occupational dis-eases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender
Completely Section: Types and rates of occupational injuries, page 77
65 G4-LA7 Workers with high incidence or high risk of diseases related to their occupation
Completely Section: Employees whose professional activity bears high injury risk, page 78-79
Aspect: Training and Education
66 G4-СПМ Disclosures on Management Approach Completely Section: Training and development of personnel, page 73
67 G4-LA10 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings
Completely Section: Training and development of personnel, page 73Section: Employee structure by educa-tion, page 72Section: Talent pool, page 73Section: Attraction of young specialists, page 74
Aspect: Diversity and Equal Opportunity
68 G4-СПМ Disclosures on Management Approach Completely Section: Human resources management policy, page 72
69 G4-LA12 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity
Completely Section: Employee structure by category and gender, page 72
Category: Social - Sub-Category: SocietyAspect: Local communities
70 G4-СПМ Disclosures on Management Approach Completely Section: Stakeholder engagement, page 63
71 G4-SO1 Percentage of operations with implemented local community engagement, impact assessments, and development programs
Completely Section: Stakeholder engagement, page 63
Power industry protocolOverall
72 G4-EU1 Rated capacity Completely Section: Corporation overview, page 14
73 G4-EU2 Power generation Completely Section: Key performance highlights for 2013–2015, page 5
74 G4-EU3 Number of residential, industrial, institutional and commercial customer accounts
Completely Section: Geography of operations, page 6
75 G4-EU4 Length of above and underground transmission and distribution lines by regulatory regime
Completely Section: Main production highlights, page 16-17
76 G4-EU5 Allocation of CO2 emissions allowances or equivalent Completely Section: Greenhouse gas emissions (СО2), page 66
GRI G4 COMPLIANCE TABLE FOR THE MANAGEMENT REPORT
87
2015ANNUAL REPORT
86
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2015 (in thousands KZT)
31 December 2015
31 December 2014
ASSETS
NON-CURRENT ASSETS:
Property, plant and equipment 228,987,976 206,284,356
Goodwill 2,424,419 2,424,419
Intangible assets 1,557,159 238,363
Deferred tax asset 678,959 116,716
Other financial assets 210,000 969,700
Advances paid 3,865,706 6,052,173
Other non-current assets 384,360 480,006
Total non-current assets 238,108,579 216,565,733
CURRENT ASSETS:
Inventories 6,412,643 6,593,785
Trade accounts receivable 13,669,521 12,610,777
Advances paid 1,442,893 1,288,714
Income tax prepaid 509,955 404,807
Other current assets 2,431,636 3,496,079
Other financial assets 14,276,758 10,263,905
Cash 2,279,387 2,805,932
Total current assets 41,022,793 37,463,999
TOTAL ASSETS 279,131,372 254,029,732
EQUITY AND LIABILITIES
EQUITY:
Share capital 46,043,272 46,043,272
Additional paid-in capital 1,348,105 1,348,105
Revaluation reserve on property, plant and equipment 47,502,275 51,005,740
Retained earnings 34,727,976 41,473,796
Total equity 129,621,628 139,870,913
NON-CURRENT LIABILITIES:
Bonds issued 22,331,233 15,516,792
Loans 52,676,536 29,180,380
Deferred revenue 1,268,695 1,358,972
Deferred tax liabilities 31,649,648 31,809,901
Ash disposal area restoration liabilities 351,710 476,390
Finance lease obligations 672,195 787,815
Employee benefit obligations 119,690 111,952
Other long-term payables 223,657 205,095
Total non-current liabilities 109,293,364 79,447,297
Consolidated financial statements of the Corporation for 2015 were prepared in accordance with International Financial Reporting Standards and include financial statements of subsidiary organizations from the date of their acquisition Principles of accounting policy are unified for all enterprises of the Corporation
88 89
FINANCIAL STATEMENTS 2015ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)AS AT 31 DECEMBER 2015(in thousands KZT)
31 December 2015
31 December 2014
CURRENT LIABILITIES:
Current portion of bonds issued 754,846 627,078
Loans 14,260,908 13,608,183
Trade accounts payable 19,521,841 11,987,285
Advances received 2,161,570 3,030,985
Income tax payable - 6,812
Current portion finance lease obligations 115,620 109,993
Current portion of ash disposal area restoration liabilities 53,587 -
Current portion of employee benefit obligations 11,427 12,610
Other liabilities and accrued expenses 3,336,581 5,328,576
Total current liabilities 40,216,380 34,711,522
TOTAL EQUITY AND LIABILITIES 279,131,372 254,029,732
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2015(in thousands KZT)
2015 2014
REVENUE 107,932,528 107,783,546
COST OF SALES (84,144,330) (82,575,262)
GROSS PROFIT 23,788,198 25,208,284
General and administrative expenses (7,743,757) (7,653,966)
Selling expenses (1,927,558) (1,767,612)
Finance costs (3,772,955) (2,867,484)
Finance income 917,251 861,332
Foreign exchange loss, net (20,031,129) (861,561)
Loss on impairment of property, plant and equipment - (466,351)
Other income 429,403 2,132,481
(LOSS)/PROFIT BEFORE TAXATION (8,340,547) 14,585,123
INCOME TAX BENEFIT/(EXPENSE) 726,860 (3,603,466)
(LOSS)/PROFIT FOR THE YEAR (7,613,687) 10,981,657
Attributable to:
Parent (7,613,687) 10,012,284
Non-controlling interests - 969,373
OTHER CONPREHENSIVE INCOME FOR THE YEAR, net of income tax
Items that will not be reclassified subsequently to profit or loss:
Gain on revaluation of property - 34,301,900
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR (7,613,687) 45,283,557
Attributable to:
Parent (7,613,687) 44,193,176
Non-controlling interests - 1,090,381
(Loss)/earnings per share, in tenge (206 05) 289 79
90 91
FINANCIAL STATEMENTS 2015ANNUAL REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015(in thousands KZT)
Share capital Additional paid-in capital
Revaluation reserve on property, plant and equipment
Retained earnings Equity attributable to owners of the parent
Non-controlling interests
Total equity
At 1 January 2014 37,590,045 4,288,735 18,020,220 36,192,388 96,091,388 8,152,689 104,244,077
Profit for the year - - - 10,012,284 10,012,284 969,373 10,981,657
Other comprehensive income for the year - - 34,180,891 - 34,180,891 121,009 34,301,900
Total comprehensive income for the year - - 34,180,891 10,012,284 44,193,175 1,090,382 45,283,557
Share issuance 8,453,227 - - - 8,453,227 - 8,453,227
Amortization of revaluation reserve on property, plant and equipment - - (1,195,371) 1,195,371 - - -
Dividends declared - - - (2,330,129) (2,330,129) (14,523) (2,344,652)
Purchase of non-controlling interest - (2,940,630) - (3,564,050) (6,504,680) (9,228,548) (15,733,228)
Fair value adjustment less income tax - - - (32,068) (32,068) - (32,068)
At 31 December 2014 46,043,272 1,348,105 51,005,740 41,473,796 139,870,913 - 139,870,913
Loss for the year - - - (7,613,687) (7,613,687) - (7,613,687)
Other comprehensive income for the year - - - - - - -
Total comprehensive loss for the year - - - (7,613,687) (7,613,687) - (7,613,687)
Amortization of revaluation reserve on property, plant and equipment - - (3,503,465) 3,503,465 - - -
Dividends declared - - - (2,635,598) (2,635,598) - (2,635,598)
At 31 December 2015 46,043,272 1,348,105 47,502,275 34,727,976 129,621,628 - 129,621,628
92 93
FINANCIAL STATEMENTS 2015ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2015(in thousands KZT)
2015 2014
OPERATING ACTIVITIES:
(Loss)/profit before taxation (8,340,547) 14,585,123
Adjustments for:
Depreciation and amortization 9,421,150 6,581,828
Finance costs 3,772,955 2,867,484
Foreign exchange loss 20,031,129 861,561
Loss on impairment of property, plant and equipment - 466,351
Accrual of allowance for doubtful debts 287,810 56,599
Gain on write-off of accounts payables (54,984) (66,164)
Accrual of provision for unused vacations 34,288 58,523
Accrual of allowance for obsolete and slow-moving inventories 385 46,436
Employee benefit expenses 30,729 15,316
Loss/(gain) on disposal of property, plant and equipment 109,412 (814,567)
Finance income (917,251) (861,332)
Other adjustments (12,671) (3,867)
Operating cash flow before changes in working capital 24,362,405 23,793,291
Change in inventories 180,757 (1,702,811)
Change in trade accounts receivable (1,241,721) (2,960,317)
Change in advances paid (180,654) 278,246
Change in other current assets 50,034 (48,313)
Change in trade accounts payable (187,148) 4,498,313
Change in deferred revenue (35,028) 894
Change in advances received (869,415) (417,199)
Change in employee benefit obligations (24,174) 708
Change in other liabilities and accrued expenses 422,167 (412,529)
Cash provided by operating activities 22,477,223 23,030,283
Income tax paid (382,931) (627,665)
Interest paid (4,899,733) (3,515,531)
Net cash provided by operating activities 17,194,559 18,887,087
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEAR ENDED 31 DECEMBER 2015(in thousands KZT)
2015 2014
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (22,048,099) (31,152,746)
Acquisition of intangible assets (886,224) (113,677)
Acquisition of non-controlling interest (1,878,449) (5,401,551)
Proceeds from disposal of property, plant and equipment 270,587 1,866,709
Cash placed on deposits (15,441,034) (16,897,285)
Cash withdrawn from deposits and interest received 15,341,026 17,000,162
Cash returned from guarantee fees - (58,040)
Change in long term advances 1,738,662 3,608,811
Net cash used in investing activities (22,903,531) (31,147,617)
FINANCING ACTIVITIES:
Proceeds from loans 24,205,767 27,755,192
Proceeds from issuance of bonds 6,665,356 1,199,999
Repayment of loan from related party 973,996 -
Finance lease (150,542) -
Repayment of loans (23,715,221) (15,366,365)
Dividends paid (2,981,929) (1,094,846)
Repayment of bonds - (564,839)
Net cash generated from financing activities 4,997,427 11,929,141
NET DECREASE IN CASH (711,545) (331,389)
CASH at the beginning of the year 2,805,932 3,051,830
Effect of exchange rate changes on the cash balance of cash held in foreign currencies 185,000 85,491
CASH at the end of the year 2,279,387 2,805,932
94 95
2015ANNUAL REPORT
Overhead power line is an electric line for transmis-sion of electric power through the wires located outdoors and attached by means of insulators and fittings to supports or brackets
Overhead transmission line is a construction for transmission of electric power over a distance by wires
Gigacalorie is a unit of measurement of thermal en-ergy used for assessment in heat power industry, heating systems, utilities sector
Gigacalorie per hour is a derived unit used to specify the amount of heat produced or used by some equipment per a unit of time
Cooling tower is a structure having a shape of an ex-haust tower providing for an air draught
Goodwill is the difference between the price of a com-pany and the fair value of all its assets
GDP deflator (gross domestic product deflator) is the price index created for measurement of general price level of goods and services (of consumer’s basket) for a certain period in the economy
Ash is an incombustible residue (in the form of dust) that is formed from mineral impurities in complete combus-tion of fuel
Ash dump is a place for collection and disposal of waste ash and slag generated during combustion of solid fuel at combined heat and power plants
Calorie (cal) is an off-system unit for measuring the amount of heat
Combined heat and power generation means gen-eration of electric power by the electric power generator driven by a steam turbine and the heat and steam coming from the steam turbine
Boiler is a device for generating pressurized steam or hot water through fuel combustion, use of electric power, heat of exhaust gas or technological process
Power transmission line (PTL) is a structure consisting of wires (cables) and auxiliary devices for transmission of electric power from power plants to consumers
Megawatt is a unit of power measurement in electric-ity production
Pump is a device for generating a pressure flow (suc-tion, discharge) of mainly fluids by energizing it (by kinetic or potential energy)
Pumping unit is a pump “with” a set of equipment mounted according to a certain scheme ensuring pump’s operation
Steam turbine is an energy turbo machine, the ele-ment of steam turbine unit that converts the potential en-ergy of a high-temperature-high-pressure steam into the mechanical energy of rotation of its rotor, which drives an electric generator
Substation is an electric installation used for conver-sion and distribution of electric power and consisting of transformers or other power converters, switchgear, con-trol devices and auxiliary facilities
Available capacity is a value equal to installed capacity of the equipment minus the power that cannot be gener-ates for technical reasons (insufficient draught in chimney, cooling systems of turbine condensers, etc )
Available capacity of a unit (plant) is an installed ca-pacity of a generating unit (plant), minus its capacity lim-itations
Combined heat and power plant (CHPP, cogenera-tion heating plant) is a thermal power plant generating not only electric power, but also heat, heat is distributed to con-sumers in the form of steam and hot water
MPE Plan is a draft standards for maximum permissible emissions
Transformer (from Latin transformare – to transform, to convert) is a device for converting any significant proper-ties of energy (e g , electric transformer, torque converter) or objects (e g , photo transformer)
Turbine is a prime motor with rotational movement of its working body – the rotor – that converts kinetic energy of the steam, gas or water medium into mechanical oper-ation
Turbine unit is a set of steam turbine, electric generator and exciter, united by one shaft train; it converts potential energy of steam into electric power
Installed capacity is the effective value of the turbine units’ rated capability
Installed thermal capacity of the plant is the sum of all rated heating capabilities for all the equipment com-missioned under the act and designed for supplying heat to external customers and steam and hot water for internal needs
Installed power capacity of the electric power sys-tem is total effective power output of all turbo and hydro-electric power plants of the electric power system in accor-dance with their passports or specifications
Emulsifier is a device for ash and dust removal working in a phase inversion mode
GLOSSARY
COSO Committee of Sponsoring Organizations of the Treadway Commission
CTF Clean Technology Fund EBITDA Earnings before Interest, Taxation,
Depreciation and AmortizationESAP Environmental and Social Action PlanISO International Organization for StandardizationKEGOC Kazakhstan Electricity Grid Operating
Company JSCOHSAS Occupational Health and Safety
Management SystemsJSC Joint Stock CompanyAEDC Akmola Electricity Distribution CompanyАSCAHE Automatic System for Commercial
Accounting of Heat EnergyАSCAEP Automatic System for Commercial
Accounting of Electric PowerGDP Gross Domestic ProductOL Overhead LineOTL Overhead Transmission LineGcal GigacalorieGcal/h gigacalories per hourSPAIID State Program for Accelerated Industrial and
Innovative DevelopmentGRES State District Power PlantHEPP Hydroelectric Power PlantEBRD European Bank for Reconstruction and
Development FAC Fly Ash CollectorIIF Islamic Infrastructure FundkWh kilowatt per hourCL Cable Line
SG SwitchgearPL Power LineMW MegawattMNE RK Ministry of National Economy of the
Republic of KazakhstanMCI Monthly Calculation IndexVAT Value Added TaxNGO Non-Governmental OrganizationEP Environment Protection PREDC Pavlodar regional electric distribution
company JSCPCHPP-2 Petropavlovsk Combined Heat And Power
Plant No 2PE PAVLODARENERGO JSCRK Republic of KazakhstanPGA Power Grid AreaICS Internal Control SystemSSIC Self-Supporting Insulated ConductorNK REDC North Kazakhstan regional electric
distribution company JSCSKE SEVKAZENERGO JSCMM Mass MediaQMS Quality Management SystemEMS Environmental Management SystemRMS Risk Management SystemAC AgricultureLLP Limited Liability PartnershipCHPP Combined Heat and Power PlantCAPEC Central-Asian power-energy company JSCCAEPCO Central-Asian Electric Power Corporation
JSCPP Power Plant
ABBREVIATIONS
96
CENTRAL-ASIAN ELECTRIC POWER CORPORATION JSC
The head-office of CAEPCO JSC is located at:89, Karasay Batyr st , Almaty, 050012, Republic of KazakhstanE-mail: info@energy kzTel : +7 (727) 258-49-41Fax: +7 (727) 258-49-42
INVESTOR AND SHAREHOLDER RELATIONS
Gulnara Artambayeva,Member of the Board of Directors, CAEPCO JSC
89, Karasay Batyr st , Almaty,Republic of Kazakhstantel : +7 (727) 258-49-41fax: +7 (727) 259-66-43
Karlygash Kasymkhanova,Chief accountant, CAEPCO JSC
89, Karasay Batyr st , Almaty,Republic of Kazakhstantel : +7 (727) 258-49-47fax: +7 (727) 259-66-43
Talgat Zhumadilov,Corporate Secretary, CAEPCO JSC
89, Karasay Batyr st , Almaty,Republic of Kazakhstantel : +7 (727) 258-49-40fax: +7 (727) 259-66-43
PERSON IN CHARGE OF THE ANNUAL REPORT
Saltanat Zhundibayeva,Director of Public Relations Department, CAEPCO JSC
89, Karasay Batyr st , Almaty,Republic of Kazakhstantel : +7 (727) 259-08-63fax: +7 (727) 259-66-43
AUDITOR
Auditor of CAEPCO JSC is Deloitte LLP located at:Nurly-Tau business center, 36, Al-Farabi ave , Almaty, Republic of Kazakhstan Tel : +7 (727) 258-13-40Fax: +7 (727) 258-13-41
REGISTRAR
Integrated Securities Registrar JSC (state registration certificate No 1678-1910-02-AO issued on 11 01 2012 by the Department of Justice of Almaty)
CONTACTS
Annual Report prepared by Expert Kazakhstan LLP